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We show that analyst coverage proxies contain information about expected returns. We decompose analyst coverage into abnormal and expected components using a simple characteristic-based model and show that firms with abnormally high analyst coverage subsequently outperform firms with abnormally...
Persistent link: https://www.econbiz.de/10013000282
Firms with central boards of directors earn superior risk-adjusted stock returns. A long (short) position in the most (least) central firms earns average annual returns of 4.68%. Firms with central boards also experience higher future return-on-assets growth and more positive analyst forecast...
Persistent link: https://www.econbiz.de/10013008834
It is well established that value stocks outperform glamour stocks, yet considerable debate exists about whether the return differential reflects compensation for risk or mispricing. Under mispricing explanations, prices of glamour (value) firms reflect systematically optimistic (pessimistic)...
Persistent link: https://www.econbiz.de/10013093880
I provide evidence that investors systematically overweight analyst forecasts by demonstrating that prices do not fully reflect the predictable component of analyst forecast errors. This evidence conflicts with conclusions in prior research relying on traditional approaches to predicting analyst...
Persistent link: https://www.econbiz.de/10013094105
We examine the link between the scarcity of arbitrage capital and investors' response to firms' earnings information. Our tests are motivated by the idea that the cost of financing levered investment strategies (i.e., investing with borrowed funds) increases in the risk profile of the securities...
Persistent link: https://www.econbiz.de/10012854566
This paper examines the relationship between divergent opinions and post-earnings announcement drift. We provide an improved measure of opinion divergence constructed from the dispersion of order flow across Nasdaq market makers that captures the breadth of divergence that is lost by...
Persistent link: https://www.econbiz.de/10012730534
This study builds upon existing research into the determinants of discounting in seasoned equity offerings (SEOs) with a specific focus on the role of underwriter reputation. I find that reputational capital enhances the ability of underwriters to serve as intermediaries between issuing firms...
Persistent link: https://www.econbiz.de/10012732841
We study the use of firms' book-to-market ratios (B/M) in value investing and its implications for comovements in firms’ stock returns and trading volumes. We show B/M has become increasingly detached from common alternative valuation ratios over time while also becoming worse at forecasting...
Persistent link: https://www.econbiz.de/10012586511