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On the correlation structure of microstructure noise in theory and practice

Diebold, Francis X.; Strasser, Georg H. - 2008

We argue for incorporating the financial economics of market microstructure into the financial econometrics of asset return volatility estimation. In particular, we use market microstructure theory to derive the cross-correlation function between latent returns and market microstructure noise,...

Persistent link: https://www.econbiz.de/10003831222

The Opposing Effects of Information Complexity and Information Content on Return Volatility

Belo, Frederico - 2018

We evaluate the impact of complexity and content of new information on stock return volatility dynamics around 10-K fillings. On average, return volatility increases by 0.4% in the first four weeks after the release of the report, followed by a 2.6% decrease in the subsequent six weeks. This...

Persistent link: https://www.econbiz.de/10012937620

Motivated Beliefs about Stock Returns

Cueva, Carlos; Iturbe-Ormaetxe, Inigo - 2021

, in a laboratory experiment, we elicit peoples’ price predictions for simulated stocks and compare them to the Bayesian … benchmark. Then, in a second experiment, we elicit peoples’ daily price predictions for real stocks over a six-week period. In … both experiments, we find that people predict higher future values for losing stocks when they happen to hold them. This …

Persistent link: https://www.econbiz.de/10013213257

The Effects of Investors’ Information Processing Limitations When Incorporating Return on Assets into Their Investment Decisions

Hewitt, Max - 2017

Research suggests that investors fail to fully process changes in return on assets due to their incomplete processing of changes in asset turnover. We propose that investors do not fully process changes in return on assets—stemming from changes in asset turnover—because of their (1) fixation...

Persistent link: https://www.econbiz.de/10012965083

Are Investors Ever Rational?

Mukherjee, Saptarshi - 2012

Behavioral biases like disposition effect and over-confidence have received much attention as a potential driver of numerous anomalies observed in the markets. Also, it has been argued that information uncertainty tends to exacerbate these biases and induce stronger irrational behavior among...

Persistent link: https://www.econbiz.de/10013099978

Asset Returns with Earnings Management

Sun, Bo - 2009

The paper investigates stock return dynamics in an environment where executives have an incentive to maximize their compensation by artificially inflating earnings. A principal-agent model with financial reporting and managerial effort is embedded in a Lucas asset-pricing model with periodic...

Persistent link: https://www.econbiz.de/10013156133

10-K Filing Length and M&A Returns

Chircop, Justin - 2019

This study examines the association between 10-K filing length and M&A returns. We posit that 10-K filing length influences shareholder information acquisition and processing costs. Longer 10-K filings reduce information acquisition costs by making more information about the target available to...

Persistent link: https://www.econbiz.de/10012903887

Stock Returns and Future Tense Language in 10-K Reports

Karapandza, Rasa - 2016

This paper shows that firms talking less about the future in their annual reports generate positive abnormal returns of about 5% annually. I measure how much companies talk about the future in their annual 10-K reports by the frequency of the verbs will, shall, and going to. The evidence favors...

Persistent link: https://www.econbiz.de/10013008549

Investor Attention and Municipal Bond Returns

Cornaggia, Kimberly Rodgers - 2020

the natural experiment created by bond-insurer insolvency, we show that municipal bond investors ignore insurers' equity …

Persistent link: https://www.econbiz.de/10012853733

Are Investors Ever Rational?

Mukherjee, Saptarshi - 2014

Behavioral biases like disposition effect and overconfidence have received much attention as a potential driver of numerous anomalies observed in the markets. Also, it has been argued that information uncertainty tends to exacerbate these biases and induce stronger irrational behavior among...

Persistent link: https://www.econbiz.de/10013057707

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