We present a statistical model that accounts for persistent fluctuations in characteristic-sorted portfolio returns. The model provides a simple formula for adjusting the standard errors of expected return estimates. With plausible parameter values, the adjusted standard errors double, casting...

We show that an activist's reputation is a critical determinant of the success of their campaigns. We model reputation as target managers' belief about the activist's willingness to initiate a proxy fight. Our model indicates reputation, rather than stake size, induces managers to settle without...

This paper assesses different approaches to testing the cross-sectional valuation effects of an event for firms with different characteristics. Standard cross-sectional return regressions typically reject at the 1% significance level more than 25% of the time in non-event periods, suggesting...