We examine the association between margin requirements and the market’s efficiency in incorporating firm-specific and market-level public news. Combining the Fed’s 22 changes in margin requirements with a hand-collected sample of earnings announcements between 1934-1975, we show that higher...

We study options market participants’ trading behavior before and after the options multiplier increases. After the options multiplier increases, the options market becomes more efficient. By analyzing the high-frequency microstructure dataset, we show that local retail and local institutional...

This paper uses accounting-based reverse engineering of market expectations to identify potentially mispriced stocks. Building upon the “errors-in-expectations” hypothesis, we develop a theoretically funded yet practical tool for stock screening in this paper. We use the Ohlson (1995) model...

Linguistic specificity effectively reduces barriers to information cognition, increasing the efficiency of information acquisition, integration and processing. Combining the psycholinguistics theory of the concreteness effect with asset-pricing theory, we determine that linguistic specificity in...

The past several years have witnessed the introduction of hundreds of so-called “smart beta” equity indices. These indices provide exposure to risk factors, such as value or low volatility, in order to seek excess return and/or risk reduction compared to cap-weighted indices. Although the...

Value Line's timeliness rankings for common stocks are the topic of much debate and research in finance journals. The interest stems from Value Line's purported ability to select stocks that outperform the market, and such stock-selection success is considered anomalous to the market efficiency...

Breakdowns in market quality are extreme price movements that reverse once the market learns that nothing fundamental has occurred. The average daily breakdown frequency from 1993-2013 is 1.03%, with averages in 2010-2013 more than two-thirds lower at 0.34%. Breakups, extreme price increases,...

We examine how sell-side equity analysts strategically disclose information of differing quality to the public versus the buy-side mutual fund managers to whom they are connected. We consider cases in which analysts recommend that the public buys a stock, but some fund managers sell it. We...

In 2015 the Tokyo Stock Exchange (TSE) implemented Arrowhead Renewal improvements (ARI) that reduced latency from about one millisecond to less than 0.5 milliseconds. Simultaneously, the ARI introduced new risk management functions to improve market fairness by reducing manipulative trading...

We study return predictability of the Dow Jones Industrial Average indices from 1900 to 2009. We find strong evidence that time-varying return predictability is driven by changing market conditions, consistent with the implications of the adaptive markets hypothesis. During market crashes, no...