This paper examines to what extent stock market anomalies are driven by firm fundamentals in an investment-based asset pricing framework. Using Bayesian Markov Chain Monte Carlo (MCMC), we estimate a two-capital q-model to match firm-level stock returns, instead of matching portfolio-level...

We take a simple q-theory model and ask how well it can explain external financing anomalies, both qualitatively and quantitatively. Our central insight is that optimal investment is an important driving force of these anomalies. The model simultaneously reproduces procyclical equity issuance...

In a sample of the Brazilian stock market from 1999 to 2015, this paper shows that the book-to-market and momentum of individual firms capture some of the cross-sectional variation in average stock returns, while the market β and size do not play a role. The positive relation of cross-section...

Increasing globalization has meant the internet becoming ever more part of the routine of people around the world. With the evolution of the internet, social networks have emerged in order to facilitate communication between people, communities and even between corporations. Social networks...

We examine the real effects of stock market efficiency by analyzing how noise in stock prices affects the efficiency of capital allocation. Using data from 42 countries and a long time-series, we find that the efficiency of capital allocation across firms (the sensitivity of corporate investment...

We show in a fairly general setting of a buyer and seller with the same preferences trading two related assets so as to share volatility risk that illiquidity and virtually all impediments to trade cannot be priced. This is because the buying and selling counterparties must both be optimizing....

I show in a setting of a buyer and seller with the same preferences trading two related assets so as to share volatility risk that illiquidity and virtually all impediments to trade cannot be priced in the absence of excess short-selling costs. This is because the buyer values the asset at the...

Using theories from the behavioral finance literature to predict that investors are attracted to industries with more salient outcomes and that therefore firms in such industries have higher valuations, we find that firms in industries that have high industry-level dispersion of profitability...

Feedback from stock prices to cash flows occurs because information revealed by firms' stock prices influences the actions of competitors. We explore the implications of feedback within a noisy rational expectations setting with publicly listed and private firms. In our setting, stock prices are...

There is tension underlying whether asset redeployability, which refers to the salability of corporate capital assets, shapes crash risk. On one hand, asset redeployability enables managers to opportunistically exploit asset sales to manage earnings upwards to hoard bad news, which, in turn,...