We examine two hypotheses to explain stock mispricing: i) the money illusion hypothesis (Modigliani and Cohn (1979)) and ii) the resale option hypothesis (Scheinkman and Xiong (2003)). We find that the money illusion hypothesis may explain the level, but not the volatility, of mispricing in the...

This paper employed eleven data series which consist of stocks, bonds, bills, equity premiums, term premiums, and various default premiums to investigate whether January seasonality reported in existing literature is robust across different states of the economy as this has important trading...

This paper studies the relationships between underwriter reputation, underwriter spread, and IPO underpricing. We consider the information content of underwriter spread and find that it conveys information pertinent to IPO quality. Because underwriter spread is endogenous, underpricing and...

We decompose P/E ratios into a fundamental component and a residual component that cannot be explained by the firm or economic fundamentals. Purging the fundamental component from observed P/E ratios, we find that portfolios based on residual P/E ratios exhibit performance reversal only in...

We study compensation of college chief executives from 1997 to 2004. Although presidential salaries have acquired the attention of the media, Congress, and the Internal Revenue Service (IRS) in recent years, they are much below those of corporate CEOs. Compared with CEOs in corporations with...

Purpose – The purpose of this paper is to investigate the relationships between the Index of Economic Freedom, equity market performance and its volatility. Design/methodology/approach – The paper examines whether the level of economic freedom is significant for a country's stock market...