We study implications of unpriced "granular measurement errors" -- idiosyncratic shocks to large firms that aren't well-diversified in market indices -- for asset pricing tests and propose alternative tests insensitive to them. We find stronger evidence of an intertemporal relation between the...

Combining machine learning with econometric analysis is becoming increasingly prevalent in both research and practice. A common empirical strategy involves the application of predictive modeling techniques to "mine" variables of interest from available data, followed by the inclusion of those...

Data snooping is a major concern in empirical asset pricing. We develop a new framework to rigorously perform multiple hypothesis testing in linear asset pricing models, while limiting the occurrence of false positive results typically associated with data snooping. By exploiting a variety of...

Although all types of accounting numbers are in theory prone to noise, the concept receives verylittle attention in cost accounting. Motivated by its potentially detrimental consequences fordecision making, we develop a numerical experiment that investigates how random measurementerrors...

There is a divergence in the returns of top-performing (star) firms and the rest of the economy, especially in industries that rely on a skilled labor force, raising concerns of their market power. We show that the divergence is largely explained by the mismeasurement of intangible capital....

The ability to reduce current and future taxable income with prior years' taxable losses is highly relevant for explaining firms' effective and marginal tax rates. Compustat data on the tax loss carryforward (TLCF) are, however, often missing. We propose a method to impute estimated values for...

The occurrence of accounting manipulation and creative accounting practices have consequently reduced the value of accounting numbers in the form of decreased earnings quality. Analysts use these reported earnings to make appropriate predictions and as such the underlining principles of the...

The highly mathematical nature of the Arrow-Debreu and other similar models of general equilibrium hide rather than elucidate the nature of equilibrium in a private property market economy where all factors of production may be purchased or rented. It is an empirical commonplace that the...

Active portfolio managers are eager to predict future volatility in the returns of schemes. Returns of each scheme are tracks with the returns of respective bench mark, technically called as tracking error. Ex-ante tracking error plays a crucial role in predicting future performance of the...

Non-classical measurement error with false positives and negatives produces biased and inconsistent estimates. This is the case whether the mismeasured variable is a dependent or an explanatory variable. Moreover, having an IV does not fix this issue. Instead, this paper shows that proper...