This study applies a model of systematic belief revision to examine the effect of the relation between current‐period unexpected earnings and prior‐period security returns on the current period relation between those unexpected earnings and returns. Cross‐sectional analysis blurs the...

Studies of naïve diversification show that average total portfolio risk declines asymptotically as number of stocks increases. Recent work by Bennett and Sias (2011) and Haensly (2020) shows that a significant amount of idiosyncratic risk remains, even for portfolios with large numbers of...