This paper is concerned with empirical and theoretical basis of the Efficient Market Hypothesis (EMH). The paper begins with an overview of the statistical properties of asset returns at different frequencies (daily, weekly and monthly), and considers the evidence on return predictability, risk...

The paper proposes an elementary agent-based asset pricing model that, invoking the two trader types of fundamentalists and chartists, comprises four features: (i) price determination by excess demand; (ii) a herding mechanism that gives rise to a macroscopic adjustment equation for the market...

We examine when anomaly returns occur in order to understand if they exist. If anomalies are spurious, then anomaly returns should not depend on their proximity to the dates on which key anomaly information is released. Yet, they do. Using a powerful database containing the precise release date...

Using a novel dataset containing investors' access of company filings through the SEC's EDGAR system, we show that the abnormal number of IPs searching for firms' financial statements strongly predicts future stock returns and firm fundamentals. Consistent with theories of costly information...

The option implied volatility spread and skew predict stock returns. These variables also reflect the expected cost of borrowing stock to sell short. The stock borrowing fee implied from options prices predicts changes in quoted borrowing fees and stock returns; however, the volatility spread...

The implied cost of capital (ICC), the internal rate of return that equates speculative stock price to discounted expected future dividends, includes a mispricing-driven component in addition to expected return. The estimated relation of a mispricing-associated factor (X) with ICC is thus a...

We investigate the change in the aggregate earnings-returns relation from negative to positive. We first identify a gradual structural break around the second quarter of 1991. We then find evidence of three contributing factors to the change in the relation. They are: i) an increase in the...

Banks with higher equity risk and faster loan growth have lower abnormal stock returns. By disentangling ex ante cost of capital from cash flow and discount rate news in bank stock returns, we show that the lower returns do not suggest lower cost of capital. The underperformance of banks with...

A firm's marketing efficiency, the ability to optimally deploy and integrate different marketing inputs to achieve high sales revenue at low cost, is persistent. High marketing efficiency predicts better future operating performance and stock returns, especially in competitive industries. A...