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This paper shows that persistent mispricing is consistent with a market that includes ambiguity-averse investors. In particular, ambiguity-averse investors may prefer to trade based on aggregate signals that reduce ambiguity at the cost of a loss in information. Equilibrium prices may therefore...
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to announcements of dividend increases on common stock. We find that participants in the preferred stock market respond … have to determine the source of financing of the dividend increase, which can either increase or decrease the value of … these securities. In contrast, regardless of how it is financed, a dividend increase has an unambiguous positive effect on …
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