Stock market investment decisions of individuals are positively correlated with that of co-workers. Sorting of unobservably similar individuals to the same workplaces is unlikely to explain our results, as evidenced by the investment behavior of individuals that move between plants. Purchases...

This paper studies how to incorporate observable factors in difference-in-differences and document their empirical relevance. We show that even under random assignment directly adding factors with unit-specific loadings into the difference-in-differences estimation results in biased estimates....

This paper evaluates the effect of shareholder passiveness on the market for corporate control. We find that firms with more passive shareholders (lower ownership per non-institutional shareholder) are less likely to be takeover targets, less likely to be acquired and command higher premiums....

Stock market behavior of individual investors is highly correlated with stock market behavior of their co-workers. For example, a ten percentage point increase in the fraction of co-workers that purchase stocks in a given month is associated with a two percentage point increase in the likelihood...

This paper considers changes in market comovement of merging US firms. Comparing the expected to the actual post merger comovement, we find that the post merger beta exhibits excess comovement with the acquiring firm. This suggests that the firm's comovement is at least partly determined by its...

This paper provides a general model of voluntary and mandatory disclosure. In the present incomplete contract setting, disclosure determines the probability that the cash flow is verifiable. While disclosure is necessary to secure new financing, it provides existing claimholders with a windfall...

Merton (1987) shows that stocks that not all investors are informed about should yield a return premium. This premium depends on the shadow cost of incomplete information which in turn is composed of the shareholder base, relative market size and idiosyncratic risk. Utilizing a comprehensive...

Using high-frequency data we document that episodes of market turmoil in the European sovereign bond market are on average associated with large decreases in trading volume. The response of trading volume to market stress is conditional on transaction costs. Low transaction cost turmoil episodes...

We argue that there is a connection between the interbank market for liquidity and the broader financial markets, which has its basis in demand for liquidity by banks. Tightness in the interbank market for liquidity leads banks to engage in what we term “liquidity pull-back,” which involves...

We examine the relation between the shareholder base and payout policy. Consistent with the idea that the shareholder base is related to the cost of external financing we find that fi rms with small shareholder bases have lower payout levels and maintain higher cash holdings. We show that...