We investigate how security specific mispricing may persist under limits to arbitrage; specifically, when arbitragers are limited by the availability of substitutes and financial constraints. We use a part of the market to book decomposition as a proxy for mispricing. The availability of...

This paper aims to search the high volatility of stock prices in stock market crises produced by adverse information, throughout investigating the links between stock price volatility and the institutional features of the major stock exchanges as exist in practice. The study finds that the...

Do equity prices efficiently reflect fundamental information as the Efficient Markets Hypothesis suggests? The author challenges a widely held acceptance by financial academicians of the EMH. In a frictionless environment, information acquisition and trading would be costless, transaction prices...

Any lead-lag effect in an asset pair implies the future returns on the lagging asset have the potential to be predicted from past and present prices of the leader, thus creating statistical arbitrage opportunities. We utilize robust lead-lag indicators to uncover the origin of price discovery...

In a single information transfer setting, we detect both under- and overreactions of stock prices to corporate earnings news. We find that the stock prices of a firm's blockholder underreact to the firm's earnings news but the stock prices of the firm overreact to its blockholder's earnings...

In early 2019, the stock prices of the German company Wirecard AG experienced market turmoil after several critical reports on activities claimed to be illegal. To analyze the market impact of news, we use stock price data for Wirecard AG and apply the reversed news model. We elaborate on...

Generalizing the idea that price momentum can be explained by different levels of uncertainty inherent in the information structure, we implement signal-specific differences in uncertainty in a Kyle type model of strategic trading. We derive the equilibrium in a single-auction setting as well as...

We model financial innovations such as Exchange-Traded Funds, smart beta products, and many index-based vehicles as composite securities that facilitate trading common factors in assets' liquidation values. Through accessing a larger basket of assets in endogenously-chosen proportions, composite...

This paper analyzes the impact of both penal law and prosecution of insider trading on the informational efficiency of securities markets. We show that increasing the severity of penalties to insider trading as well as making insider prosecution more efficient might improve the price discovery...