Compounding can make things appear to be larger than they really are. This confusion can arise when the return from an event is compounded over a long holding-period, and the return from compounding is described as the return from the event. This paper reviews several examples of this common...

We study the motives for long-term debt issues. The primary use of debt issue proceeds is repurchasing noncurrent debt. These repurchases combined with rollovers consume 57% of proceeds, so most debt issues are not used for investment and operations and do not impact leverage. Regardless of...

We explore the relation between a country's patents and its economic and productivity growth. Consistent with patents reflecting important innovations, a one standard deviation increase in patent stock leads to a 1.58% (1.52%) elevation in GDP (TFP) growth. Patent stock has a stronger impact on...

Previous studies find that U.S. firms make large equity issues when stock prices are high for the purpose of building precautionary cash savings. We find these effects internationally, but only in countries where it is less costly to issue equity. In countries where external finance is costlier,...

I test whether the persistence of the momentum and reversal effects is the result of idiosyncratic risk limiting arbitrage. Idiosyncratic deters arbitrage, regardless of the arbitrageur's level of diversification. Reversal is prevalent only in high idiosyncratic risk stocks, suggesting that...

U.S. financial development varies significantly over the last half century, primarily increasing since the 1980s. Difference-in-difference tests reveal that financial development has disproportionate effects on industries that depend more on external finance. Higher financial development...

In U.S. counties where more of the population or their ancestors immigrated from countries with more gender-egalitarian beliefs, firms are 20% more likely to have a female director, and almost twice as likely to have a female CEO. In such counties, female directors are also more likely to chair...

Consistent with a costly arbitrage equilibrium in which arbitrage costs insulate mispricing, this study finds that mutual fund managers have stock-picking ability for stocks with high idiosyncratic volatility but not for stocks with low idiosyncratic volatility. These findings suggest that fund...

Previous studies have shown that high short interest stocks have low subsequent returns. We test whether the persistence of this effect is due to costs limiting arbitrage. The arbitrage cost that we focus on is idiosyncratic risk which, regardless of the arbitrageur's level of diversification,...

Firms increasingly issue shares for the purpose of cash savings. During the 1970s, $1.00 of issuance resulted in $0.23 of cash savings; over the most recent decade $1.00 of issuance resulted in $0.60 of cash savings. This increase is caused by increasing precautionary motives. Proxies for...