We investigate whether investors' perception of a firm's trustworthiness affects underreaction to earnings news. We develop a model that predicts how trust helps explain underreaction to news, and test this prediction under three different empirical settings where a firm's perceived...

Prior research has documented that arbitrage activity significantly reduces or eliminates stock market anomalies. However, if anomalies arise due to unsophisticated investors' behavioral biases, then these same biases can also apply to unsophisticated arbitrageurs and thereby disrupt the...

We show that the cost of trading on negative news, relative to positive news, increases before earnings announcements. Our evidence suggests that this asymmetry is due to financial intermediaries reducing their exposure to announcement risks by providing liquidity asymmetrically. This asymmetry...

Predicted stock issuers (PSIs) are firms with expected “high-investment and low-profit” (HILP) profiles that earn unusually low returns. We carefully document important features of PSI firms to provide insights on the economic mechanism behind the HILP phenomenon. Top-PSI firms are...

This paper demonstrates that measures of stock price synchronicity based on market model R2s are predictably biased downwards as a result of stock illiquidity, and that previously-employed remedies to correct market model betas for measurement bias do not fix R2. Using a large international...

We document that stocks that have optimistic (pessimistic) consensus recommendations and are currently held by many short-term institutions exhibit large stock-return reversals: Their large past outperformance (underperformance) is followed by large negative (positive) future alphas. The...

I reexamine whether media articles with substantive editorial content inform the market's reaction to firms' earnings news. Using variation in earnings announcement coverage because of restructuring at The Wall Street Journal (WSJ), my analyses suggest that WSJ earnings articles improve price...

High-frequency trading has become a dominant force in the U.S. capital market, accounting for over 70% of dollar trading volume. This study examines the implication of high-frequency trading for stock price volatility and price discovery. I find that high-frequency trading is positively...

We demonstrate that the uncertainty communicated by US R&D accounting is also risk relevant. First, we quantify the information on the uncertainty of future benefits through revisions of expectations regarding future cash flows. R&D significantly influences the market's revisions of expectations...

The financial instability stemming from large volumes of simultaneous selling in the corporate bond market has been a topic of concern in recent years. Investors in this market care primarily about the downside risk of a firm given their concave payoff function, and this is precisely the...