Ben Balbale, a partner at hedge fund Matrix Capital, must decide whether to exit their investment in Rovi Corporation, a company with a diverse portfolio of patents used primarily for digital interactive guides. Rovi's shares are up over 50% from the time Balbale initiated a position in the...

The maturity of new debt issues predicts excess bond returns. When the share of long-term debt issues in total debt issues is high, future excess bond returns are low. This predictive power comes in two parts. First, inflation, the real short-term rate, and the term spread predict excess bond...

Real investors and markets are too complicated to be neatly summarized by a few selected biases and trading frictions. The quot;top downquot; approach to behavioral finance focuses on the measurement of reduced form, aggregate sentiment and traces its effects to stock returns. It builds on the...

We study how investor sentiment affects the cross-section of stock returns. We predict that a wave of investor sentiment has larger effects on securities whose valuations are highly subjective and difficult to arbitrage. Consistent with this prediction, we find that when beginning-of-period...

We build a model that helps to explain why increases in liquidity - such as lower bid-ask spreads, a lower price impact of trade, or higher turnover - predict lower subsequent returns in both firm-level and aggregate data. The model features a class of irrational investors, who underreact to the...

We use a simple model to outline the conditions under which corporate investment is sensitive to non-fundamental movements in stock prices. The key prediction is that stock prices have a stronger impact on the investment of quot;equity dependentquot; firms - firms that need external equity to...

The maturity of new debt issues predicts excess bond returns. When the share of longterm debt issues in total debt issues is high, future excess bond returns are low. This predictive power comes in two parts. First, inflation, the real short-term rate, and the term spread predict excess bond...

It is well known that firms are more likely to issue equity when their market values are high, relative to book and past market values, and to repurchase equity when their market values are low. We document that the resulting effects on capital structure are very persistent. As a consequence,...

A diversified portfolio of risk arbitrage positions produces an abnormal return of 0.6% to 0.9% per month over the period from 1981 to 1996. We trace these profits to practical limits on risk arbitrage. In our model of risk arbitrage, arbitrageurs? risk-bearing capacity is constrained by deal...

This paper describes board size and composition and investigates the role of venture capital in a sample of 1,116 IPO firms. First, venture capital-backed firms have fewer insider and instrumental directors and more independent outsiders. Second, we consider board composition as the outcome of a...