We use laboratory experiments to analyze how the existence of trading frictions (a transaction fee and a ban on short selling margin buying) affects occurrence strength post-earnings-announcement drift. find lower activity higher asset prices in presence frictions. While initial price reaction earnings announcements is weaker, PEAD not materially affected. Trading strategies aimed at exploiting...

The “Post-Earnings-Announcement Drift” refers to an anomaly in financial markets. It describes the drift of a firm’s stock price direction earnings surprise for extended period time. Contrary what efficient market hypothesis predicts, does not lead full, instantaneous adjustment prices, but slow, predictable drift. phenomenon has been described at length decades. Numerous studies have investiga...

Prior research demonstrates that investors respond differently to earnings surprises that are part of a string of consecutive earnings increases or surprises than to those that are not. To shed light on who values these patterns, I compare trading responses of small and large traders to earnings surprises that occur during a series of positive or negative surprises. I find that the relative int...

This paper analyzes the earnings effect of skill-biased technological change (SBTC), focusing on the comparison of science and engineering (S&E) and non-S&E occupations. In the analysis, we assert that S&E occupations and non-S&E occupations differ in the nature of skill requirements and their susceptibility to technological change; and consequently the earnings effects of SBTC also demonstrate...

The paper quantitatively evaluates the interaction between capital-skill complementarity and endogenous low-, medium-, and high-skilled labour supply in generating wage inequality, using a dynamic computable general equilibrium (CGE) model of the Auerbach-Kotliko¤ (1987) type. The counterfactual analysis conducted shows that the German skill premium de…ned by the 9 to 1 decile limit of earnings...

This paper provides an introduction to the special issue of the Review of Economic Dynamics on “Cross Sectional Facts for Macroeconomists”. The issue documents, for nine countries, the level and the evolution, over time and over the life cycle, of several dimensions of economic inequality, including wages, labor earnings, income, consumption, and wealth. After describing the motivation and the ...

This paper uses a principal-agent model to study the interaction between hedging and earnings management. Hedging makes earnings management more difficult and they appear to be strategic substitutes in this model, which is both consistent with existing empirical evidence and provides a new explanation for that evidence. If hedging decision is contractible, hedging is efficient since it reduces ...