This article analyzes the manifold situations in which the efficient-market hypothesis (EMH) has influenced — or has failed to influence — federal securities regulation and state corporate law, and the prospective roles for the EMH in these contexts. In federal securities regulation, the EMH...

Presentation Slides for "Overconfidence, Arbitrage, and Equilibrium Asset Pricing" This paper offers a model in which asset prices reflect both covariance risk and misperceptions of firmsapos prospects, and in which arbitrageurs trade against mispricing. In equilibrium, expected returns are...

This paper reviews research that uses big data and/or machine learning methods to provide insight relevant for equity valuation. Given the huge volume of research in this area, the review focuses on studies that either use or inform on accounting variables. The article concludes by providing...

This paper examines whether and how coverage from a unique crowdsourced financial estimates platform, Estimize, affects firms. Employing a difference-in-difference design comparing firms that gain coverage from Estimize with firms that do not, I find that covered firms experience decreased...

In this study, we examine the predictability of firm-specific stock price crashes using modern machine learning techniques and develop a crash prediction model that utilizes both financial ratios and textual data from the Management Discussion and Analysis (MD&A) of 10-K files. We show that...

The estimation of expected security returns is one of the major tasks for the practical implementation of the Markowitz portfolio optimization. Against this background, in 1992 Black and Litterman developed an approach based on (theoretically established) expected equili-brium returns which...

The Baker and Wurgler (2006) sentiment index purports to measure irrational investor sentiment, while the University of Michigan Consumer Sentiment Index is designed to largely reflect fundamentals. Removing this fundamental component from the Baker and Wurgler index creates an index of investor...

Average skewness, which is defined as the average of monthly skewness values across firms, performs well at predicting future market returns. This result still holds after controlling for the size or liquidity of the firms or for current business cycle conditions. We also find that average...

In this paper, we document evidence that downside betas tend to comove more than upside betas during a financial crisis, but upside betas tend to comove more than the downside betas during financial booms. We find that the asymmetry between Downside-Beta Comovement and Upside-Beta Comovement is...

We examine the predictive effect of sentiment on the cross-section of stock returns across different economic states. The degree of mispricing and the subsequent price correction can be different between economic expansion and recession because of the limits of arbitrage and short sale...