This paper documents that 56% of nonprofessional social media investment analysts (SMAs) are skilled and declare beliefs that generate positive abnormal returns (ABRs), while 44% produce negative ABRs. 13% of all SMAs are high-skill type and produce a 1-week 3-factor alpha of 61 bps, while the remaining 87% generate only 6 bps. The distinctive features of high-skill SMAs are primarily firm and industry specializations. Although SMAs tend to extrapolate and herd, their expectations are not systematically wrong. For higher-skilled SMAs compared to the less-skilled ones, extrapolation fades more quickly, and herding is lower, consistent with theory.

We propose CTREND, a new trend factor for cryptocurrency returns, which aggregates price and volume information across different time horizons. Using data on more than 3,000 coins, we employ machine learning methods to exploit information from various technical indicators. The resulting signal reliably predicts cryptocurrency returns. The effect cannot be subsumed by known factors and remains robust across different subperiods, market states, and alternative research designs. Moreover, it survives the impact of transaction costs and persists in big and liquid coins. Finally, an asset pricing model that incorporates CTREND outperforms competing factor models, providing a superior explanation of cryptocurrency returns.

Consistent with theories on the equilibrium matching between capital structure and employee job risk aversion, we find a robust, positive association between a firm’s leverage and its employees’ family labor income diversification. Higher-Leverage firms also recruit new employees with greater income diversification. For identification, we exploit two policy shocks that exogenously change employee income diversification and firm leverage, respectively. Individual employee-level tests further reveal that workers with differential risk attitudes adjust their job choices and household labor income portfolios in response to significant shifts in their employers’ leverage. Finally, human bankruptcy costs contribute to the general level of corporate risk-taking.

We document that firms with greater product similarity to their peers exhibit lower rates of financial fraud. We show that peer similarity is associated with better information environments, which is consistent with monitors’ enhanced ability to benchmark against other firms. The negative relation between product similarity and fraud remains after controlling for alternative mechanisms including incentive compensation structures, competition, and internal and external governance characteristics. Overall, our findings suggest that greater peer similarity increases the marginal cost of fraud, and therefore, ex ante disincentivizing managers from committing fraud.

Using manually compiled cost of equity (COE) estimates disclosed in takeover regulatory filings, we provide novel evidence on how investment bankers estimate discount rates. COE estimates are related to several risk proxies, such as beta and size. Other firm characteristics are unrelated to COE estimates or provide relations contradicting academic evidence. We also explore the role of incentives. For example, banks use significantly higher COEs in management buyouts, which potentially underestimates target value, making the bid more attractive for target shareholder approval.

We document significant increases in the suspension of ongoing drug projects following the passage of the Food and Drug Administration Amendments Act of 2007 (FDAAA), which mandates that pharmaceutical companies publicly disclose detailed clinical study results. Our results suggest a causal interpretation through difference-in-differences analyses that exploit variations in pre-FDAAA information environments. We also show evidence that fewer new projects are initiated after the FDAAA. Drug developers’ learning from peer failures is the primary mechanism, further amplified by financial constraints. We also examine the consequences of enhanced information disclosure, including changes in firm investment efficiency, drug quality, and disease morbidity.

We find that a corrupt local environment amplifies the effects of financial distress. Following regional spikes in financial misconduct, credit becomes more difficult to obtain for local borrowers—even those not implicated themselves. This is particularly harmful for cash-constrained firms, which cut investment more sharply and lay off more workers during industry downturns. We also find that local clustering of financial misconduct is a risk factor for bankruptcy.

We characterize optimal mutual fund risk-taking strategies in competitive multi-period tournaments among multiple players. With multiple competitors, every player begins by taking maximum risk. In the final period, all players continue to take maximum risk except the leading player, who employs a “lock-in” strategy that depends on the magnitude of the lead. Our theory predicts the leader should strategically lock in advantage by reducing risk-taking if and only if the lead is great enough, rather than an increase in risk-taking by the trailers to try to catch up. Empirical evidence from style-adjusted mutual fund tournaments provides strong and robust support.

We find that common ownership among acquirers enhances rather than hinders competition in the firm sale process. One common owner raises the likelihood that target firms are sold through auction (vs. negotiation with one buyer) by 21.5%. The effect is causal according to identifications based on mergers between financial institutions. Exploring economic channels, we observe selling firms respond to common ownership among acquirers by avoiding cross-owned acquirers, bargaining hard, and inviting more buyers when cross-owned acquirers initiate the deal but not by terminating the deal. Consistent with enhanced competition, common ownership among acquirers is positively associated with deal quality.

We study the role of competition in customers’ reactions to litigation against firms, using anonymized mobile phone location data. A class action lawsuit filing is followed by a 4% average reduction in customer visits to target firms’ outlets in the following months. The effect strongly depends on competition. Outlets facing more competition experience significantly larger negative effects. Closer competition matters more, both in terms of geographic and industry proximity. Announcement returns and quarterly accounting revenues around lawsuit filings also strongly depend on competition. Our results suggest that competition is an important component in customers’ ability to discipline firms for misbehavior.

We examine the preopening process and price discovery from the offer price to the first open price in initial public offerings. The extent of price discovery during preopening is influenced by firm characteristics and preopening attributes, such as volume of shares executed in preopening, canceled orders, order imbalance, and changes in indicative price. Institutional investors cancel 4 orders for every executed order. Each phase of preopening contributes to incremental price discovery. In “hot” IPOs, almost all price discovery processes occur during preopening, whereas in “cold” IPOs, half of the price adjustment occurs after the market opens.

We examine whether location within a dense regional cluster of interconnected businesses affected firm performance during the Great Recession and the subsequent recovery. Firms in denser regional clusters experienced faster sales growth than their rivals in less dense clusters, especially firms operating in more competitive industries and those more able to reap agglomeration benefits. They also faced lower uncertainty, invested more in both physical capital and intangible capital, and maintained higher employment growth. Their greater resiliency and agility led to significant increases in their valuations. These results suggest that regional clusters provide competitive advantages during turbulent times.

We document firms often determine CEO equity grants based on a predetermined dollar value (value-based equity grant) instead of on the number of shares (share-based grant). Value-based equity grants weaken the relationship between stock performance and CEO equity pay, lower CEO portfolio delta, and slow firms’ investment in R&D. We find that retention pressure is a key reason for the use of value-based equity pay, while governance could also matter. Overall, this paper alerts boards to the unintended consequences of pursuing a target pay level or pay structure because such practices can lead to value-based equity grants in CEO compensation.

This article presents a New Keynesian model to capture the linkages between macro fundamentals and the nominal yield curve. The model explains bond yields with a low level of news in expected inflation and plausible term premia. This implies that the slope of the yield curve predicts future bond yields and that risk-adjusted historical bond yields satisfy the expectations hypothesis. The model also explains the spanning puzzle, matches key moments for real bond yields, captures the evolution of the price-dividend ratio, and implies that the slope of the yield curve and the price-dividend ratio forecast excess equity returns.

The growing popularity of home-sharing platforms such as Airbnb, partly fueled by hosts’ ability to evade local taxes and regulations, has been shown to elevate housing costs by reallocating long-term housing units to the short-term rental market. This study assesses whether enhanced tax enforcement can mitigate this trend. We analyze staggered tax collection agreements between Airbnb and Florida counties, wherein Airbnb collects taxes from the hosts directly. Using a difference-in-differences methodology, we find these agreements significantly slow the growth of housing costs, highlighting the importance of tax policy in addressing the sharing economy’s influence on housing affordability.