We apply an ex ante measure of heterogeneity in investor beliefs - excess industry volatility - to test the Miller (1977) prediction about IPO overvaluation in a sample of 7,212 IPOs from 1980 to 2003. Generally, IPOs in industries with high investor heterogeneity of beliefs have much higher...

In this paper, we examine the cross-sectional predictive ability of the Refinitiv Environmental, Social and Governance (ESG) score for returns in the foreign exchange market, using ESG scores aggregated at the national level, and find that ESG is a strong negative predictor of currency returns....

This paper discusses the benefits and drawbacks of adopting Bayesian inference for practical equity valuation and fundamental analysis and derives a decision-focused valuation model for investors. Despite the inevitably subjectivist (i.e. Bayesian) nature of equity valuation, almost all research...

Using the positive shift in tone of Fox News coverage of macroeconomic news after the Republican Bush election in 2000, we investigate whether media slant influences the investment decisions of short sellers. We find that firms headquartered in Republican-leaning townships with Fox News...

This monograph provides a thorough review of earnings quality issues and analysis. Its primary objectives are to help gain a deep understanding of earnings quality and facilitate the development of comprehensive, granular, and contextual earnings quality indicators and analyses. While there are...

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...

This paper reviews literature on reverse engineering in equity valuation from the perspective of a fundamental investor. Despite a history of over 80 years, the literature on reverse engineering shows no clear consensus on the modelling, conceptualisation and operationalisation of the technique....

Using textual analysis, we identify the set of Trump tweets that contain information on macroeconomic policy, trade, or exchange rate content. We then analyze the effects of Trump tweets on the intraday trading activity of foreign exchange markets, such as trading volume, volatility, and FX spot...

The growing popularity of factor investing has led to a proliferation of factor indices targeting the same factors, as well as factor definitions and portfolio instruction techniques. For an investor, what matters is to know what kind of risks they are taking on and whether they are getting the...

We examine the cross-sectional predictive ability of media pessimism for delta-hedged equity option returns. We find that a long-short portfolio that buys options of stocks with low media pessimism while going short options attached to high pessimism stocks, over the previous month, renders...