We propose a simple framework for understanding accounting-based stock return regularities. A firm's accounting reports provide noisy information about hidden economic states that evolve according to a Markov process. In response to the accounting reports, a representative Bayesian investor...

The implied cost of capital (ICC), the internal rate of return that equates speculative stock price to discounted expected future dividends, includes a mispricing-driven component in addition to expected return. The estimated relation of a mispricing-associated factor (X) with ICC is thus a...

We develop a novel approach to identify characteristics of images that are likely to, and found to, affect investment decisions. We also create new methodologies to quantify these characteristics. We hypothesize and find that our newly developed machine learning-based measure of...

This study provides evidence for a positive association between mutual fund holdings’implied cost of capital (ICC) and future performance. Consistent with large transactioncosts of ICC-based investments impeding their exploitation and employing a ICC-basedstrategy reflecting skill,...

Prior studies show that investor learning about earnings-based return predictors from academic research erodes return predictability. However, the signaling power of “bottom-line” earnings has declined over time, which complicates assessments of investor learning about profitability signals...

Prior literature shows that earnings have come to explain less stock price movement over time, suggesting that firm fundamental information has become less important. In this paper, we replace earnings with earnings announcement returns as a measure of firm fundamental news and find that these...