Psychological evidence and casual intuition predict that sunny weather is associated with upbeat mood. This paper examines the relationship between morning sunshine in the city of a country's leading stock exchange and daily market index returns across 26 countries from 1982 to 1997. Sunshine is...

In existing models of information acquisition, all informed investors receive their information at the same time. This article analyzes trading behavior and equilibrium information acquisition when some investors receive common private information before others. The model implies that, under...

This paper uses pre-offer market valuations to evaluate the misvaluation and "Q" theories of takeovers. Bidder and target valuations (price-to-book, or price-to-residual-income-model-value) are related to means of payment, mode of acquisition, premia, target hostility, offer success, and bidder...

This paper tests the hypothesis that irrational market misvaluation affects firms' takeover behavior. We employ two contemporaneous proxies for market misvaluation, pre-takeover book/price ratios and pre-takeover ratios of residual income model value to price. Misvaluation of bidders and targets...

We find a positive association between short-selling and accruals during 1988-2003. Short arbitrage occurs primarily among firms in the top accrual decile, and firms with sufficiently high supply of loanable shares (proxied by institutional holdings). Consistent with limits to short arbitrage,...

Past research has shown that the level of operating accruals is a negative cross-sectional predictor of future stock returns. This paper examines whether the accruals anomaly extends to the aggregate stock market. In contrast with cross-sectional findings, there is no indication that aggregate...

We provide a model with overconfident risk neutral investors, and therefore no risk premia, in which a price-based portfolio such as HML earns positive expected returns and loads on fundamental macroeconomic variables. Furthermore, loadings on such portfolios are proxies for mispricing and...

We provide a model in which a single psychological constraint, limited investor attention, explains both under- and over-reaction to different earnings components. Investor neglect of information in current-period earnings about future earnings induces postearnings announcement drift, the...