I show how a post-announcement drift can be generated in a model with fully rational investors who interpret public information differently. Differential interpretation of information transforms public raw information into private interpreted information. If investors recognize their limited...

Abstract This paper studies information-based manipulation in a setting where sophisticated investors have access to an independent source of information. It is shown that investors' access to independent information is crucial to support truthful announcements by the manipulator. However, even...

Abstract We study the interrelation among the post-earnings announcement drift (PEAD) and momentum short-term anomalies, and the reversal long-term anomaly. Some theories argue that PEAD and momentum are a consequence of underreaction to new information on the market. One theory in particular,...

Periods of technological revolution are usually associated with overvaluation of and over-investment by innovating firms. This paper develops a model that explains this behavior in a frictionless rational setting. When fully rational innovating firms face uncertainty about the returns to scale...

Expected Shortfall (ES) as a risk measure has several shortcomings. It does not in general reward diversification; it considers only extreme losses; and it assumes risk neutrality. We propose an alternative risk measure, the n-th order Root Lower Partial Moment (rLPM), that overcomes these and...

Abstract In 1995, the Basel Accords introduced an alternative method to compute the market risk charge through the use of a risk model developed internally by the financial institution. These internal models, based on the Value-at-Risk (VaR), follow certain rules that are defined under the Basel...