In this paper we conduct an out-of-sample test of two behavioral theories that have been proposed to explain momentum in stock returns. We test the gradual-information-diffusion model of Hong and Stein (1999) and the investor conservatism bias model of Barberis, Shleifer and Vishny (1998) in a...

In this paper, we examine whether the external financing and investment rate of the firm are influenced by abnormal analyst coverage. We find that firms with high (low) excess analyst coverage have consistently higher (lower) external financing and investment rate than firms of similar size in...

We investigate whether divergence of opinion among investors, manifested in the dispersion of analysts' earnings forecasts, plays an important role in asset pricing. Specifically, we test whether disagreement can explain the cross-sectional return difference between value and growth stocks over...

This study provides new evidence on the effects of macroeconomic news announcements on the Canadian dollar futures price. Previous work on foreign exchange futures has focused only on the impact of U.S. news, ignoring the bi-national character of information flows that affect exchange rates. The...

We examine whether acquisitions by overconfident managers generate superior abnormal returns and whether managerial overconfidence stems from self-attribution. Self-attribution bias suggests that overconfidence plays a greater role in higher order acquisition deals predicting lower wealth...

Several empirical studies show that investment strategies that favor the purchase of stocks with low prices relative to dividends, earnings, book value or other measures of value yield higher returns. Some of these studies imply that investors are too optimistic about (glamour) stocks that have...

We appraise the monitoring activity of security analysis from the perspective of the manager-shareholder conflict. Using a data set of more than 7,000 company-year observations for manufacturing companies tracked by security analysts over the 1988-94 period, we found that security analysis acts...

In this research authors show that institutional investors' skill matters the most during high sentiment periods when market signals are noisy. The results reveal that fund managers with the highest (lowest) skill add (lose) $7.71 ($5.64) million of value during high sentiment periods, compared...

This study presents a theoretical model that links chief executive officer (CEO) overconfidence to the value loss of corporate diversification. Consistent with the model's prediction, the findings show that diversified firms run by overconfident CEOs experience value loss compared to diversified...

The security market line (SML) accords with the capital asset pricing model (CAPM) by taking on an upward slope in pessimistic sentiment periods, but is downward sloping during optimistic periods. We hypothesize that this finding obtains because periods of optimism attract equity investment by...