Technical traders base their analysis on the premise that the patterns in market prices are assumed to recur in the future, and thus, these patterns can be used for predictive purposes. This paper uses the daily Dow Jones Industrial Average Index from 1897 to 1988 to examine the linear and nonlinear predictability of stock market returns with simple technical trading rules. The nonlinear specif...

Asset prices observed in financial markets combine equilibrium prices and market microstructure noise. In this paper, we study how to tell apart large shifts in equilibrium prices from noise using high frequency data. We propose a new nonparametric test which allows us to asymptotically remove the noise from observable price data and to discover jumps in fundamental asset values. We provide its...

Open-market repurchases reduce the supply of a stock’s shares in the market. Japanese stock repurchase data allows us to successfully isolate the supply effect from information effects of the stock repurchase. We focus on stock price behavior during the actual repurchase period when no new information is released and find that the excess stock returns are significantly positive only during actu...

We develop a multi-asset trading model to examine the closed-end fund discount. The model shows that the discount can arise if the quality of private information in the underlying assets is sufficiently better than in the fund. The model also indicates that a discount (premium) can arise if the excessive volatility of the fund dominates (is dominated by) the fund’s diversification benefit. More...

We adopt a systemic risk indicator measured by the price of insurance against systemic financial distress and assess individual banks’ marginal contributions to the systemic risk. The methodology is applied to the 19 bank holding companies covered by the US Supervisory Capital Assessment Program (SCAP), with the systemic risk indicator peaking around 1.1 trillion USD in March 2009. Our systemic...

Methodologically, this paper frames the opportunity cost of any merger as the value of the alternative deals it precludes or defers. This challenges the standard eventstudy hypothesis that stock markets benchmark the value of a merger deal by the profits the partners would have earned in stand-alone activity. Substantively, the paper finds that megamergers in banking show two size-related excep...

This article offers a dynamic model of opaque over-the-counter markets. A seller searches for an attractive price by visiting multiple buyers, one at a time. The buyers do not observe contacts, quotes, or trades elsewhere in the market. A repeat contact with a buyer reveals the seller’s reduced outside options and worsens the price offered by the revisited buyer. When the asset value is uncerta...

Bushman and Smith (2001, this issue) provide a useful review of research on the role of accounting in management compensation contracts and an appealing future research agenda that builds on recent research using a cross-country approach. This paper rounds out their discussion by highlighting some limitations of their research agenda, providing a critical review of the contributions of accounti...

We use the database leak of Mt. Gox exchange to analyze the dynamics of the price of bitcoin from June 2011 to November 2013. This gives us a rare opportunity to study an emerging retail-focused, highly speculative and unregulated market with trader identifiers at a tick transaction level. Jumps are frequent events and they cluster in time. The order flow imbalance and the preponderance of aggr...

This study analyzes the market quality differences, in terms of liquidity and volatility, between Real Estate Investment Trusts (REITs) and non-REIT common stocks. The 2008 financial crisis has significantly influenced the market quality for REITs. Our findings reveal intraday patterns indicating a lower liquidity, higher volatility, and greater price impact for REITs than nonREITs for pre-cris...