We examine how insiders and firms trade when arbitrage is limited. When arbitrage is costly (proxied by high idiosyncratic risk), insiders and firms earn higher absolute returns on their trades (insider trading, share repurchases, and seasoned equity offerings) in the following year. Furthermore, they initiate their trades following greater past price movements in the preceding year. These resu...

We assess the effect of four short-sale constraints on stock returns in isolation and in combination, in generally falling versus generally rising markets, and considering relative effects for large/mid cap versus small/micro cap firms. We find that across our variety of model specifications, there is substantial evidence that our more fully specified model provides considerable additional expl...

The consensus wisdom of active mutual fund managers, as reflected in their average overand underweighting decisions, contains valuable information about future stock returns. Analyzing a comprehensive sample of active U.S. equity funds 1984—2008, we find that stocks heavily overweighted by active funds outperform their underweighted counterparts by more than 7% per year, after adjustments for t...

Article history: Received 9 March 2007 Accepted 9 July 2008 Available online 12 October 2008 We examine four European stock indices and the prices of eight major German stocks for indications of psychological barriers. The frequency, (expected) returns, intraday volatility and trading volume of these assets are studied contingent on whether the prices lie within a certain range around round num...

This paper provides new empirical evidence that price-based technical indicator variables can enhance the ability of accounting variables in explaining cross-sectional stock returns. We apply both OLS and state-space modelling to a sample of firms included in the Russell 3000 index over the period from 1999-2012 to compare the roles of the two main types of information typically used by stock i...

Using audit trail data for a sample of NYSE firms we show that medium-size trades are associated with a disproportionately large cumulative stock price change relative to their proportion of all trades and volume. This result is consistent with the predictions of Barclay and Warner’s (1993) stealth-trading hypothesis. We find that the source of this disproportionately large cumulative price imp...

This paper studies a discrete-time financial model with or without transaction costs, in which only partial information can be observed. Partial information model means that the investors in the market can observe no more information except the stock prices. This model has been investigated in Karatzas and Xue (1991), Lakner (1995, 1998), and Cheng (2004), etc. Applying stochastic filtering the...

Article history: Received 22 September 2011 Received in revised form 28 January 2013 Accepted 2 February 2013 Available online 9 February 2013 This paper analyzes the investor sentiment effect in four key European stock markets: France, Germany, Spain and the UK. The findings show that sentiment has a significant influence on returns, varying in intensity across markets. The variation appears t...

There is a general perception that the large trading volume in initial public offerings is mostly due to ‘‘flippers’’ that are allocated shares in the offering and immediately resell them. On average, however, flipping accounts for only 19% of trading volume and 15% of shares offered during the first two days of trading. Institutions do more flipping than retail customers and hot IPOs are flipp...

Bayesian learning implies decreasing weights on prior beliefs and increasing weights on the accuracy of the analyst’s past forecast record, as the number of forecast errors comprising her forecast record (its length) increases. Consistent with this model of investor learning, empirical tests show that investors’ reactions to forecast news are increasing in the product of the accuracy and length...