This paper provides evidence that a firm’s stock price movements affect its customer demand. I develop a model in which customers learn about a firm’s product quality partially from its stock price. This learning induces feedback from the price to customer demand. Furthermore, the firm manager adjusts product launch decisions in anticipation of these demand shifts. Consistent with the model’s i...

We analyze the value of public information in a competitive endowment economy. We provide a global result that an early release of information about the future state of the economy is desired by all agents, or Pareto improving, if agents disagree about the prospect of the economy and asset markets are complete. We further prove that for certain levels of agents’ disagreement, all agents prefer ...

This research aims to analyze and to compare the ability of different mathematical models, such as artificial neural networks (ANN) and ARCH and GARCH models, to forecast the daily exchange rates Euro/U.S. dollar (USD), identifying which, among all the models applied, produces more accurate forecasts. By empirically comparing the different mathematical models developed in this research, the tra...

The realized size and value premia reflect earnings-induced price surprises that do not fit the rational pricing story. In addition, they seem to have little to do with systematic risks. This is because the majority of value or small firms with persistently high systematic risks are not rewarded with a premium. The premium happens, as a price adjustment, only to the subset of migrating firms wh...

This paper proposes a new panel model of cross-sectional dependence. The model has a number of potential structural interpretations that relate to economic phenomena such as herding in financial markets. On an econometric level, it provides a flexible approach of modelling interactions across panel units and can generate endogenous cross-sectional dependence that can resemble the dependence tha...

Researchers have reported mispricing in index options markets. This study further examines the efficiency of the S&P 500 index options market by testing theoretical pricing relationships implied by no-arbitrage conditions. The effect of a traded stock basket, Standard and Poor’s Depository Receipts (SPDRs), on the link between index and options markets is also examined. Pricing efficiency withi...

Using the Dow Jones Industrial Average Index record breaking days as a proxy for market wide attention, we show that as the aggregate stock market intensifies investor attention, stock market response to individual firms’ earnings announcements significantly increases. We hypothesize that there are many channels for the attention spill-over effect and document strong supportive evidence of one ...

Corporate sports sponsorship is an important part of many companies’ corporate communication strategy. We take the example of major football tournaments to show that sponsorship indeed affects the sponsor’s (stock) market value. We find a statistically significant impact of football results (at an individual game level) of the seven most important football nations at European and World Champion...

Recently, investment in high technology companies boomed as people invested large sums of money even when there was little chance of the company being profitable. This is contrary to classical beliefs that investors have rational expectations and maximise their utility. Instead we must consider the idea that people are irrational and make decisions for many reasons, few of which involve a judic...

Donald Trump’s victory in the 2016 presidential election was a political surprise to almost everyone, domestically and internationally. This paper investigates international investors’ reaction this apparent global surprise. Employing an event study methodology, we test three widely known behavioral hypotheses concerning investor unexpected news, that is, Overreaction Hypothesis (OH), Uncertain...