We analyze a firm's choice between dividend payments and stock repurchases under heterogeneous beliefs and the subsequent long-term stock return performance of firms adopting the two forms of payout. Firm insiders, owning a certain fraction of its equity, choose between paying out its cash...

We examine whether ambiguity is priced in the cross-section of expected stock returns. Using the cross-sectional dispersion in real-time forecasts of real GDP growth as a measure for ambiguity, we find that high ambiguity beta stocks earn lower future returns relative to low ambiguity beta...

Revisions of consensus forecasts of macroeconomic variables positively predict announcement day forecast errors, whereas stock market returns on forecast revision days negatively predict announcement day returns. A dynamic noisy rational expectations model with periodic macroeconomic...

Despite considerable empirical evidence reporting a negative relationship between net share issuance and subsequent returns, it remains unresolved whether this anomaly is explained by risk or investor irrationality. This paper examines the net share issuance anomaly using seasoned equity...

Assuming that risk premiums are determined by failure risk, we present a stylized model of interactions among risk-proxy variables, external financing, and stock returns in which a common mispricing factor, involving operating profit and external financing, drives the following five asset...

We investigate the prediction of excess returns and fundamentals by financial ratios – dividend-price ratio, earnings-price ratio, and book-to-market ratio – by decomposing financial ratios into a cyclical component and a stochastic trend component. We find both components predict excess...

This paper examines the cross-sectional relation between leverage and future stock returns. Prior research documents a puzzling negative correlation. We show that it is largely caused by firms' use of internal financing when having significant off-balance-sheet operating assets due to...