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Garleanu, Nicolae Bogdan; Pedersen, Lasse Heje; … - C.E.P.R. Discussion Papers - 2005

We model the demand-pressure effect on prices when options cannot be perfectly hedged. The model shows that demand pressure in one option contract increases its price by an amount proportional to the variance of the unhedgeable part of the option. Similarly, the demand pressure increases the...

Persistent link: https://www.econbiz.de/10005067592

A Theory of Income Smoothing When Insiders Know More Than Outsiders

Acharya, Viral V; Lambrecht, Bart - C.E.P.R. Discussion Papers - 2012

We consider a setting in which insiders have information about income that outside shareholders do not, but property rights ensure that outside shareholders can enforce a fair payout. To avoid intervention, insiders report income consistent with outsiders' expectations based on publicly...

Persistent link: https://www.econbiz.de/10011083832

Endogenous Information Flows and the Clustering of Announcements

Acharya, Viral V; DeMarzo, Peter; Kremer, Ilan - C.E.P.R. Discussion Papers - 2011

We consider the strategic timing of information releases in a dynamic disclosure model. Because investors don’t know whether or when the firm is informed, the firm will not necessarily disclose immediately. We show that bad market news can trigger the immediate release of information by firms....

Persistent link: https://www.econbiz.de/10009364996

Are Retail Traders Compensated for Providing Liquidity?

Barrot, Jean-Noël; Kaniel, Ron; Sraer, David - C.E.P.R. Discussion Papers - 2014

This paper examines the extent to which individual investors provide liquidity to the stock market, and whether they are compensated for doing so.We show that the ability of aggregate retail order imbalances, contrarian in nature, to predict short-term future returns is significantly enhanced...

Persistent link: https://www.econbiz.de/10011096103

A Theory of Asset Prices based on Heterogeneous Information

Albagli, Elias; Hellwig, Christian; Tsyvinski, Aleh - C.E.P.R. Discussion Papers - 2013

With only minimal restrictions on security payoffs and trader preferences, noisy aggregation of heterogeneous information drives a systematic wedge between the impact of fundamentals on the price of a security, and the corresponding impact on cash flow expectations. From an ex ante perspective,...

Persistent link: https://www.econbiz.de/10011083236

Man or machine? Rational trading without information about fundamentals

Rossi, Stefano; Tinn, Katrin - C.E.P.R. Discussion Papers - 2014

We present a model of quantitative trading as an automated system under human supervision. Contrary to previous literature we show that price-contingent trading is the profitable equilibrium strategy of large rational agents in efficient markets. The key ingredient is uncertainty about whether a...

Persistent link: https://www.econbiz.de/10011083393

Momentum Trading, Return Chasing, and Predictable Crashes

Chabot, Benjamin; Ghysels, Eric; Jagannathan, Ravi - C.E.P.R. Discussion Papers - 2014

of risk and return of one of the most popular mechanical trading strategies—momentum. We find that the momentum strategy … has earned abnormally high risk-adjusted returns—a three factor alpha of 1 percent per month between 1927 and 2012 and 0 … the return on that money has an incentive to remain invested in momentum even when the crash risk is known to be high. …

Persistent link: https://www.econbiz.de/10011083413

Bond Ratings Matter: Evidence from the Lehman Brothers Index Rating Redefinition

Chen, Zhihua; Lookman, Aziz; Schürhoff, Norman; Seppi, … - C.E.P.R. Discussion Papers - 2012

The 2005 inclusion of Fitch ratings in the Lehman composite index ratings provides a quasi-natural experiment to identify rating-based market segmentation in the corporate bond market. Split-rated bonds with favorable Fitch rating that were mechanically upgraded to investment-grade status...

Persistent link: https://www.econbiz.de/10011083426

Lehman Brothers: What Did Markets Know?

Gehrig, Thomas; Haas, Marlene - C.E.P.R. Discussion Papers - 2014

their equity bid-ask spreads, we find evidence that the bankruptcy contributed to increasing adverse selection risk as well … as inventory holding risk. Moreover, we find supporting evidence that the degree of competition among market makers did …

Persistent link: https://www.econbiz.de/10011083604

Buffett’s Alpha

Frazzini, Andrea; Kabiller, David; Pedersen, Lasse Heje - C.E.P.R. Discussion Papers - 2013

more than 30 years, and Berkshire has a significant alpha to traditional risk factors. However, we find that the alpha …

Persistent link: https://www.econbiz.de/10011083650