We hypothesize that high stock price levels impede informed trading on the stocks and reduce price informativeness. This is because uninformed trading is needed to facilitate informed trading, and high stock prices may impose budget constraints on uninformed investors. Indeed, we find, for...

We find that stock price crash risk is positively associated with lagged equity lending fee and fee risk. This positive relation is stronger for the stocks with a lower short interest level and higher information uncertainty. Our results are robust to using alternative measures of price crash...

This paper explores whether firms manage their earnings after stock splits to meet the raised expectations from the market due to the positive signal sent by the splits. We first document that post-split drift mainly exists in the first three months and is positively associated with post-split...

We study the effect of financial market frictions on managerial compensation. We embed a market microstructure model into an otherwise standard contracting framework, and analyze optimal pay-for-performance when managers use information they learn from the market in their investment decisions....

A long literature argues corporate managers learn from stock prices, but organizations’ learning process is challenging to observe. We present a novel test using firm-level readership of financial media articles as a manifestation of managerial learning. We hypothesize that reading financial...

We document a novel salience effect in the US corporate bond market. We find that bonds with lower salience theory (ST) value have higher returns in the subsequent month. The annualized differences in one-month holding excess returns between the lowest and highest ST deciles are 3.84|-.2.-| and...

We show that three proxies for stock price informativeness, adjusted probability of information based trading (AdjPIN), price non-synchronicity and probability of information-based trading (PIN), decrease significantly due to an enlarged investor base after stock splits. The results are...

Fleckenstein et al. (2014) document that nominal Treasuries trade at higher prices than inflation-swapped indexed bonds, which exactly replicate the nominal cash flows. We study whether this mispricing arises from liquidity premiums in inflation-indexed bonds (TIPS) and inflation swaps. Using US...

Are yields of long-maturity bonds distorted by demand pressure of clientele investors, regulatory effects, or default, flight-to-safety or liquidity premiums? Using data on German nominal bonds between 2005 and 2015, we study the differential pricing and liquidity of short and long maturity...