Liquid stocks may attract short-term traders who could attenuate the informativeness of stock prices about long-run fundamentals. As a result, managers may be less (more) likely to rely on the market prices of more (less) liquid stocks when making real investment decisions. Supporting this...

We use a fully-specified neoclassical model augmented with costly external equity as a laboratory to study the relations between stock returns and equity financing decisions. Simulations show that the model can simultaneously and in many cases quantitatively reproduce: procyclical equity issuance;...

We provide evidence on market structure and the cost of raising capital by examining market structure changes in US equity markets. Only the Nasdaq's Order Handling Rules (OHR), the one reform that reduced institutional trading costs, lowered the cost of raising capital. Using a...