We use the introduction of satellite coverage of major retailers to study the capital market implications of unequal access to big data. Satellite data enabled sophisticated investors with access to such data to formulate profitable trading strategies, especially by targeting the upcoming reports of retailers with bad news for the quarter. The introduction of satellite data led to more informed short-selling activity, less informed individual buying activity, and lower stock liquidity around the reports of retailers with satellite coverage. We conclude that unequal access to big data can increase information asymmetry among market participants without immediately enhancing price discovery.

Machine learning-based stock market beta estimators outperform established benchmark models both statistically and economically. Analyzing the predictability of time-varying market betas of U.S. stocks, we document that machine learning-based estimators produce the lowest forecast and hedging errors. They also help to create better market-neutral anomaly strategies and minimum variance portfolios. Among the various techniques, random forests perform the best overall. Model complexity is highly time-varying. Historical stock market betas, turnover, and size are the most important predictors. Compared to linear regressions, allowing for nonlinearity and interactions significantly improves predictive performance.

This article examines the pricing of a firm’s carbon risk in the corporate bond market. Contrary to the “carbon risk premium” hypothesis, bonds of more carbon-intensive firms earn significantly lower returns. This effect cannot be explained by a comprehensive list of bond characteristics and exposure to known risk factors. Investigating sources of the low carbon alpha, we find the underperformance of bonds issued by carbon-intensive firms cannot be fully explained by divestment from institutional investors. Instead, our evidence is most consistent with investor underreaction to the predictability of carbon intensity for firm cash-flow news, creditworthiness, and environmental incidents.

This article shows that changes in the tone of central bank communication have a significant effect on asset prices. Tone captures how the central bank frames economic fundamentals and its monetary policy. A positive tone surprise is associated with increases in stock prices and interest rates, whereas credit spreads and volatility risk premia decrease. These tone effects are robust to controlling for policy actions as well as for conventional measures of monetary policy shocks. Our results suggest that communication tone is a powerful instrument of monetary policy, which affects risk premia embedded in asset prices.

We study when CEOs with legal expertise are valuable for firms. In general, lawyer CEOs are negatively associated with frequency and severity in employment civil rights, contract, labor, personal injury, and securities litigation. This effect is partly induced by the CEO’s management of litigation risk and reduction in other risky policies. Lawyer CEOs are further associated with an increase in gatekeepers providing additional legal oversight and a decrease in innovative activities with high litigation risk. Lawyer CEOs are more valuable during periods of enhanced compliance requirements and regulatory pressure and in industries with high litigation risk or better growth opportunities.

We examine compensation for endowment Chief Investment Officers (CIOs) overseeing portfolios with significant allocations to alternatives. We find widespread use of bonuses and that large endowments with high alternative allocations hire CIOs with stronger backgrounds, pay them more, and have higher pay-for-performance sensitivity. We find weak evidence of a relationship between compensation and future performance. Our results align with contract theory predictions but differ from empirical findings on pension funds. Endowments pay CIOs more, rely more on bonuses, attract more experienced professionals, and have lower turnover than pensions. This suggests more effective talent management compared to politically influenced public pensions.

I develop a dynamic model to investigate how labor mobility impacts firms’ decisions. In the model, firms make investment and financing decisions, hire labor with different skill and mobility levels, and set wages through bargaining. The model predicts that, in response to an increase in labor mobility, high-skill firms operate with lower financial leverage, become less responsive to investment opportunities, and invest at lower rates, while low-skill firms remain unaffected. I confirm these predictions in the data using shocks to workers’ mobility across firms. The results are useful in understanding the effects of labor mobility changes driven by government policies or technological shocks, such as the rise of remote work.

Using comprehensive account-level data, we separate Chinese retail investors into 5 groups and document strong heterogeneity in trading dynamics and performances. Retail investors with smaller account sizes cannot predict future returns correctly, display daily momentum patterns, fail to process public news, and show overconfidence and gambling preferences, while retail investors with larger account balances predict future returns correctly, display contrarian patterns, and incorporate public news in trading. Using performance measures established in previous literature, we find that smaller retail investors suffer from poor stock selection abilities and trading costs, while large retail investors’ stock selection abilities are offset by trading costs.

In this article, we show that statements of U.S. CEOs on contentious social issues are not necessarily an expression of their political views. Republican-donor CEOs are three times more likely to make social statements with a liberal slant. CEO activism is more likely if firms’ operating environment is politically polarized and employees are Democrat-leaning. Such statements are associated with a 3% increase in consumer visits to a firm’s Democrat County stores without significantly reducing them in Republican counties. CEO activism is associated with a 0.12% gain in firm value, increased quarterly sales, and a reduced likelihood of shareholder activism on social issues.

Corporate bonds’ book-to-market ratios predict returns computed from transaction prices. Senior bonds (even investment grade) with the 20% highest ratios outperform the 20% lowest by 3%–4% annually after non-parametrically controlling for numerous liquidity, default, microstructure, and priced-risk attributes: yield-to-maturity, bid–ask spread, duration/maturity, credit spread/rating, past returns, coupon, size, age, industry, and structural model equity hedges. Spreads for all-bond samples are larger. An efficient bond market would not exhibit the observed decay in the ratio’s predictive efficacy with implementation delays, small yield-to-maturity spreads, or similar-sized spreads across bonds with differing risks. A methodological innovation avoids liquidity filters and censorship that bias returns.

This study analyzes Form D filings to understand brokered startup offerings. About 60% of brokers are FINRA-registered; the rest, “finders,” are not. Startups with fewer seasoned investors and more local brokers tend to use brokers. Venture capital firms rarely join brokered offerings, but non-accredited investors do, especially offerings with finders. Overall, brokers aid in raising capital. Yet, startups using finders often fail to exit successfully and close following funding. This implies finders might be directing funds from non-accredited investors to lower-quality startups. Brokers help startups raise money without VC support, but the effectiveness of this capital allocation is unclear.

I find overlapping institutional ownership (OIO) in a customer and supplier increases the duration of their supply chain relationship. Results are stronger when vertical holdup is more severe. A quasi-natural experiment around mergers of financial institutions provides causal evidence of OIO improving relationship survival rates. Concurrent with longer-lived relationships, valuations and innovation increase, consistent with OIO effects on relationship longevity being beneficial. I find evidence of OIO strengthening relationships via an internalization channel: With more OIO, partners cooperate more, with the supplier extending more trade credit. Overall, results indicate OIO strengthens vertical relationships by alleviating holdup problems.

Using real-time data, we show that currency excess return predictability is in part due to mispricing. First, the risk-adjusted profitability of systematic trading strategies decreases after dissemination of the underlying academic research, suggesting that market participants learn about mispricing from publications. Moreover, the decline is greater for strategies with larger in-sample profits and lower arbitrage costs. Second, the effect of comprehensive risk adjustments on trading profits is limited, and signal ranks and alphas decay quickly. The finding that analysts’ forecasts are inconsistent with currency predictors implies that investors’ trading contributes to mispricing and suggests biased expectations as a possible explanation.

Firms falling short of earnings expectations are more likely to cite stakeholder-focused objectives in their public communications following earnings announcements. This behavior is consistent with managers preferring to be evaluated by subjective stakeholder-based performance criteria when falling short on objective shareholder-based measures. This increased use of stakeholder language is most evident among firms narrowly missing earnings estimates and appears unrelated to a firm’s actual environmental, social, and governance (ESG)-related activity. Stakeholder language appears to influence the evaluation of CEOs; turnover–performance sensitivity is lower for managers citing stakeholder value. Collectively, our findings are consistent with concerns that stakeholder objectives reduce managerial accountability for poor performance.

Nonbank lenders have been playing an increasing role in supplying debt, especially after the Great Recession. How important are the distortions in the greater regulation of banks that differentially limit risk-taking across alternative providers of credit? How might the growing role of nonbanks in credit markets affect financial stability? This selective review addresses these questions and discusses how banks and nonbanks helped provide liquidity to the nonfinancial sector during the COVID-19 pandemic shock. We argue that tighter bank regulation has created incentives for nonbanks to increase their participation in credit markets, a trend that creates concerns about financial stability.

Mutual fund families increasingly hold bonds and stocks from the same firm. We present evidence that dual ownership allows firms to increase valuable investments and refinance by issuing bonds with lower yields and fewer restrictive covenants, especially when firms face financial distress. Dual holders also prevent overinvestment by firms with entrenched managers. Overall, our results suggest that mutual fund families internalize the agency conflicts of their portfolio companies, highlighting the positive governance externalities of intra-family cooperation.

An unintended consequence of recent governance reforms in the United States is firms’ greater reliance on older director candidates, resulting in noticeable board aging. We investigate this phenomenon’s implications for corporate governance. We document that older independent directors exhibit poorer board meeting attendance, are less likely to serve on or chair key board committees, and receive less shareholder support in annual elections. These directors are associated with weaker board oversight in acquisitions, CEO turnovers, executive compensation, and financial reporting. However, they can also provide particularly valuable advice when they have specialized experience or when firms have greater advisory needs.

U.S. mutual funds in the securities lending market extract information from stock borrowing. Active funds exploit this information, rebalancing away from borrowed stocks whose prices tend to decrease, whereas passive funds do not. Information spillovers within fund families are stronger when the lender is a passive fund and when the family is more cooperative (less competitive). Active funds trade more aggressively on stocks with more negative future returns, suggesting that they are able to identify informed borrowing. Finally, passive funds charge higher lending fees than active funds, consistent with short sellers paying a premium to lower recall risk.

We investigate whether bank loan financing from 1994 to 2018 conveys valuable private information using a sample of over 10,000 bank loan announcements identified from 8-K filings. We show that the positive announcement effect is persistent and closely related to the information revealed in loan characteristics: The effect is stronger when deals have higher materiality, more favorable pricing, larger lead bank shares, and higher syndicate concentration. The effect is also stronger when lenders have higher credit quality and when credit market conditions are worse. The insignificant wealth effect documented in several early studies is potentially driven by small sample size.

A novel arbitrage-free model of nominal U.S. Treasuries that decomposes yields into frictionless expected rates, frictionless term premiums, and liquidity premiums produces four key results from Jan. 1987 to Aug. 2023. First, liquidity loadings are larger than for the slope and higher-order principal components. Second, the countercyclicality of required nominal Treasury returns owes to liquidity, if anything, not frictionless term premiums. Third, Federal Reserve large-scale asset purchases generally work through expected rates and frictionless term premiums, not liquidity premiums. Fourth, given similar estimates using TIPS, inflation expectations are less moored around the Federal Reserve’s price objectives than other models say.