We analyze the extent to which investors in opaque markets price information from more transparent markets. Exploiting the natural experiment created by bond-insurer insolvency, we show that municipal bond investors ignore insurers' equity prices and CDS premia, yet react to insurers'...

This paper studies the asset pricing implications of technology spillover, an important externality in innovation. While technology spillover enables firms to produce a variety of products that better satisfy their customers' love for variety, such benefits are procyclical, and investors...

Behavioral biases like disposition effect and overconfidence have received much attention as a potential driver of numerous anomalies observed in the markets. Also, it has been argued that information uncertainty tends to exacerbate these biases and induce stronger irrational behavior among...

We outline a framework in which accounting “valuation anchors" could be connected to expected stock returns. Under two general conditions, expected log returns is a log- linear function of a valuation (market value-to-accounting) multiple and the expected growth in the valuation anchor. We...

For optimal asset allocation, mean-variance investors must learn about the joint dynamics of new and existing asset classes, not only their profitability. Bitcoin's digital gold narrative provides a unique laboratory to test this hypothesis. We find that a decrease in investors' estimate on...

An analysis of the Survey of Consumer Finance shows that wealthy investors have a higher return on their stocks than their poorer counterparts. Three key empirical facts emerge: (i) wealthy investors employ more productive search efforts, (ii) financial risk bearing and search efforts are...

Recent research finds that investors, broadly defined, react to the linguistic tone of quarterly earnings conference calls; there is a positive relation between firms' stock returns and call tone (a measure of “sentiment” related word tabulations). However, this type of soft information can...

The paper investigates stock return dynamics in an environment where executives have an incentive to maximize their compensation by artificially inflating earnings. A principal-agent model with financial reporting and managerial effort is embedded in a Lucas asset-pricing model with periodic...

The paper investigates stock return dynamics in an environment where executives have an incentive to maximize their compensation by artificially inflating earnings. A principal-agent model with financial reporting and managerial effort is embedded in a Lucas asset-pricing model with periodic...

In this paper, we examine how learning about disaster risk affects asset pricing in an endowment economy. We extend the literature on rare disasters by allowing for two sources of uncertainty: (1) the lack of historical data results in unknown parameters for the disaster process, and (2) the...