The multitude of explanations for the January effect leaves the reader confused about its primary cause(s): is it tax-loss selling, window dressing, information, bid-ask bounce, or a combination of these causes? The confusion arises, in part, because evidence has generally been presented in support of a particular hypothesis though the same evidence may be consistent with another hypothesis. Fu...

We study the impact of nine categories of scheduled and unscheduled news announcements on the euro/ dollar return volatility. We highlight and analyze the pre-announcement, contemporaneous and postannouncement reactions. Using high-frequency intraday data and within the framework of ARCH-type models, we show that volatility increases in the pre-announcement periods, particularly before schedule...

Economists have long been puzzled by the tendency of investors to sell winning investments too soon and hold losing investments too long. Several behavioral explanations for this phenomenon, known as the disposition effect, have been advanced. This paper demonstrates that disposition effects are not intrinsically at odds with rational behavior. Specifically, we show (i) that disposition effects...

This paper examines the relation between annual report readability and firm performance and earnings persistence. I measure the readability of public company annual reports using the Fog index from the computational linguistics literature and the length of the document. I find that: (1) the annual reports of firms with lower earnings are harder to read (i.e., they have a higher Fog index and ar...

This article constructs an economic model of a rational trader who operates in a market with transaction costs and noise trading. The level of trading affects the rational trader’s marginal cost of transacting; as a result, trading volume (through its effect on marginal cost) is a source of risk. This engenders an equilibrium relationship between returns and volume. The model also provides a si...

This paper tests a model based on Wall's (Wall, L., 1989. Journal of Banking and Finance 13, 261±270) hypothesis of agency cost reduction using interest rate swaps. We ®nd a signi®cant positive relationship between the risk of the ®rm and the reduction of agency costs measured by the continuously compounded excess return (CAR) of the ®rm. Our ®ndings are consistent with WallÕs hypothesis and ot...

A model is presented of a uniform price auction where bidders compete in demand schedules; the model allows for common and private values in the absence of exogenous noise. It is shown how private information yields more market power than the levels seen with full information. Results obtained here are broadly consistent with evidence from asset auctions, may help explain the response of centra...

This paper utilizes Chinese stock data to provide further evidence on the power of limited attention theory in explaining post-earnings announcement drift. As retail investors prevail China and they are easily distracted by market swings, we should expect severe problems, resulting larger underreaction firm information higher sensitivity movement, i.e., so-called “market movement effect”. After...

ABSTRACT Despite the increase in and diversity of disclosure channels available, our understanding how managers incorporate channel features into their decisions remains incomplete. I provide evidence that choose relatively rich offer multiple cues, opportunities for interaction, linguistic (i.e., earnings call, as compared to press release) communicate complex information. The positive relatio...

Donald Trump’s election was a significant surprise. The reaction of company stock prices to the election reflects shifts in investor expectations about economic growth, taxes, and trade policy. High-beta stocks outperformed, presumably due to strengthened growth expectations. Expectations of significant corporate tax cuts boosted high-tax firms, but hurt firms with significant net operating los...