We examine whether “rating shopping” or “rating catering” is a more accurate characterization of rating agency interactions regarding collateralized debt obligations (CDOs) prior to the credit crisis. Although investors paid a premium for dual-ratings, AAA CDO tranches rated by both...

Conventional wisdom suggests that high-reputation banks will generally produce good securities to maintain their long-run reputation. We show with a simple model that when securities are complex a high-reputation bank may produce assets that underperform during market downturns. We examine this...

Compared to mutual funds, hedge funds prefer smaller, opaque value securities, and have higher turnover and more active share bets. Decomposing returns into three components, we find that hedge funds are better than mutual funds at stock picking by only 1.32% per year on a value-weighted basis,...

In Nasdaq IPOs between 1997 and 2002, clients of the lead underwriter bought shares worth $35.36 billion on the first day of public trading but sold shares worth only $21.45 billion, leading to a net buy imbalance of $13.91 billion, or 8.79 percent of the shares issued. The strong net buying...

Using a unique data set of Nasdaq 100 stocks, we study the daily and intradaily trading patterns of individuals and institutions. Stocks in the top return performance decile are bought in net by institutions (and sold in net by individuals) on the following day 65.2 percent of the time as...

Using a unique data set of Nasdaq 100 stocks, we study the daily and intradaily trading patterns of individuals and institutions. Stocks in the top return performance decile are bought in net by institutions (and sold in net by individuals) on the following day 65.2 percent of the time as...

This paper examines the relationship between book-to-market equity, distress risk, and stock returns. Among firms with the highest distress risk as proxied by Ohlson's (1980) O-score, the difference in returns between high and low book-to-market securities is more than twice as large as that in...

This paper examines the information embedded in both the stock and option markets prior to takeover announcements. During normal periods, buyer-seller initiated stock volume imbalances are significant predictors of next-day stock returns and option volume imbalances are uninformative. However,...

At the settlement time of the VIX Volatility Index, volume spikes on S&P 500 Index (SPX) options, but only in out-of-the-money options that are used to calculate the VIX, and more so for options with a higher and discontinuous influence on VIX. We investigate alternative explanations of hedging...

This paper examines whether employees involved in RMBS securitization experienced internal and external labor market consequences relative to similar non-RMBS employees in the same banks, and why. Senior RMBS bankers experienced similar levels of job retention, promotion, and external job market...