We find that financial analysts provide more thorough forecasts when firms’ institutional investors are distracted (i.e., when firms are neglected). We establish the causality of the effect by identifying exogenous shocks leading to institutional investor distraction following Kempf, Manconi,...

This article analyzes the effect of liquidity risk on the performance of various hedge fund portfolio strategies. Similarly to Avramov et al. (2007), we find that, before accounting for the effect of liquidity risk, hedge fund portfolios that incorporate predictability in managerial skills...

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...

This paper examines to what extent the momentum spread ratio (MSR) can predict momentum profits. The momentum spread ratio as a potential proxy of investor underreaction can significantly predict the momentum, industry momentum, and residual momentum, especially after 1994, suggesting that...

You're probably familiar, at least in passing, with the 'convexity' of long-term bonds - i.e. that yields dropping 1% produce a bigger price move than yields rising 1%. A significant amount of brainpower has gone into understanding all the ramifications of this convexity in the fixed income...

This study presents direct evidence on the question whether investors recognize the widely documented biases in securities analysts' earnings forecasts. The internal rate of return implied by current stock price and consensus earnings forecasts is found to be correlated with indicators of bias...

Exploiting financial news stories data, we construct news-implied linkages and document a strong lead-lag effect of firms with shared news coverage in China’s stock market. The news-link momentum strategy generates a monthly return of 1.33% and a four-factor alpha (Liu et al., 2019) of 1.43%....

We examine article, author and firm characteristics of investment articles published by non-professional analysts on the social media investment platform Seeking Alpha from 2006 to 2020 leading to visible market value changes. We show that there are differences between articles followed by stock...

We create a market-wide measure of dispersion in options investors' expectations by aggregating across all stocks the dispersion in trading volume across moneynesses (DISP). DISP exhibits strong negative predictive power for future market returns and its information content is not subsumed by...

We reveal a novel channel through which market participants' sentiment influences how they forecast stock returns: their optimism (pessimism) affects the weights they assign to fundamentals. Our analysis yields four main findings. First, if good (bad) “news” about dividends and interest...