Because of the intangible and highly uncertain nature of innovation, investors may have difficulty processing information associated with a firm’s innovation and innovation search strategy. Due to cognitive and strategic biases, investors are likely to pay more attention to novel and explorative patents rather than incremental and exploitative patents. We find that firms focusing on exploitatio...

Inspired by the recent literature on aggregation theory, we aim at relating the long range correlation of the stocks return volatility to the heterogeneity of the investors’ expectations about the level of the future volatility. Based on a semi-parametric model of investors’ anticipations, we make the connection between the distributional properties of the heterogeneity parameters and the auto-...

According to IFRS 7, banks have to disclose the inputs used in measuring the fair value of financial instruments. For this purpose the standard defines a three-level measurement hierarchy. The reliability of fair values is expected to decrease with decreasing hierarchy level due to the lower quality of the input factors. Using a value relevance research setting, I find that investors perceive t...

Statistical agencies collect, aggregate and release information about various aspects of the macro economy, providing a seemingly invaluable service to investors. It would be too costly for an individual to calculate inflation, new residential constructions, consumer confidence, or crop production. This aggregate information can in turn help market participants estimate the systematic risk face...

ongoing challenge for investors and managers in the industry. At Mesirow Advanced Strategies (MAS), creating custom benchmarks for each of our underlying managers is a critical component of our investment process. These custom benchmarks are created utilizing specific underlying instruments and exposures that best approximate a manager’s historical and expected exposure profile. Deviations from...

This paper seeks to analyze the way investors consider growth option values when pricing equity. To achieve this objective we study the effect on stock prices of a comparative case of direct foreign investment involving acquisition of two different growth options, whose valuation has already been well-documented in prior literature. The case consists of the two sequential investment stages carr...

Executive summary. Some say the long-run outlook for U.S. stocks is poor (even " dead ") given the backdrop of muted economic growth, already-high profit margins, elevated government debt levels, and low interest rates. Others take a rosier view, citing attractive valuations and a wide spread between stock earnings yields and Treasury bond yields as reason to anticipate U.S. stock returns of 8%...

XBRL (eXtensible Business Reporting Language) facilitates the efficient processing/interpreting of corporate financial information by investors. This paper examines market reactions to financial statement filings in China in the period before and after the XBRL mandate in China to assess the extent to which XBRL may impact the processing of financial information. It finds that absolute price re...

Using a new data set on investor sentiment, we show that institutional and individual sentiment seem to proxy for smart money and noise trader risk, respectively. First, using bias-adjusted long-horizon regressions, we show that institutional sentiment forecasts stock market returns at intermediate horizons correctly, whereas individuals consistently get the direction wrong. Second, even the si...