Revisions of consensus forecasts of macroeconomic variables positively predict announcement day forecast errors, whereas stock market returns on forecast revision days negatively predict announcement day returns. A dynamic noisy rational expectations model with periodic macroeconomic...

Crowded trades by similarly trading peers influence the dynamics of asset prices, possibly creating systemic risk. We propose a market clustering measure using granular trading data. For each stock the clustering measure captures the degree of trading overlap among any two investors in that...

Various laws and policy proposals call for regulators to make use of the information reflected in market prices. We focus on a leading example of such a proposal, namely that bank supervision should make use of the market prices of traded bank securities. We study the theoretical underpinnings...

Many stock exchanges implement advanced procedures toward preventing manipulative orders from distorting informative price discovery during preopening sessions. Often, such sessions involve both the stock and options markets, with book-based indicative stock prices and traded index options,...

In this paper, we study a dynamic Gaussian financial market model in which the traders form higher-order expectations about the fundamental value of a single risky asset. Rational uninformed traders are introduced into an otherwise standard differential information economy to investigate the...

We examine the role of earnings management in explaining the properties of asset prices and stock market participation. We demonstrate that investors' uncertainty about the extent of manipulation can cause excess movements in stock price relative to fluctuations in output. When faced with...

We propose a simple measure of investor sophistication based on financial statement experience derived from publicly available EDGAR log data about accounting information acquisition activity. This approach allows us to provide unique empirical evidence for the existence of attention induced...

This paper examines how multidimensional private information by asset sellers affects market equilibrium. I find that when asset quality is the only source of private information, sellers with high-quality assets signal their quality to buyers through partial retention of assets if and only if...

Announcing a large fiscal stimulus may signal the government’s pessimism about the severity of a recession to the private sector, impairing the stabilizing effects of the policy. Using a theoretical model, we show that these signaling effects occur when the stimulus exceeds expectations and...

Excessive risk-taking of financial agents drew a lot of attention in the aftermath of the financial crisis. Low interest rates and subdued market volatility during the Great Moderation are sometimes blamed for stimulating risk-taking and leading to the recent financial crisis. In recent years,...