Many studies have documented portfolio strategies that provide returns in excess of those expected, given the level of risk of the portfolio. Variables that seem to have predictive power for equity returns include the market capitalization of the firm’s equity and the ratio of the firm’s book equity to market equity (BE/ME). Firms with low market capitalization and high book-tomarket values see...

This paper examines persistence of raw and risk-adjusted returns for long/short equity hedge funds using the portfolio approach of Hendricks, Patel and Zeckhauser (1993). Only limited evidence of persistence is found for raw returns. Funds with the highest raw returns last year continue to outperform over the subsequent year, although not significantly while there is no persistence in returns b...

The paper studies outside …nance in a model of two-dimensional moral hazard, involving risk choices as well as e¤ort choices. If the entrepreneur has insu¢ cient funds, a …rst-best outcome cannot be implemented. Second-best outcomes involve greater failure risk than …rstbest outcomes. For a Cobb-Douglas technology, second-best e¤ort and investment levels are smaller than …rst-best; for other te...

A robust finding in the literature is that seasoned equity offerings (SEOs) are followed by negative long-run abnormal returns, which can be seen as evidence of market timing. In this paper I document the cost of market timing, based on the idea that investors view companies with the most negative abnormal returns in the year following a SEO, as most likely to have timed the issue. I find that ...

Existing studies show that firm asset and investment growth predict cross-sectional stock returns. Firms that shrink their assets or investments subsequently earn higher returns than firms that expand their assets or investments. I show that the superior returns of the low asset and investment growth portfolios are due to the omission of delisting returns in CRSP monthly stock return file and t...