Share issuance predicts cross-sectional returns in a non-U.S. sample of stocks from 41 different countries. Issuance predictability has greater statistical significance than either size, or momentum, and is similar to book-to-market. As in the U.S., the international issuance effect is robust...

At year-end, some allege that institutional investors try to mislead investors by placing trades that inflate performance (portfolio pumping) or distort reported holdings (window dressing). We contribute direct tests using daily institutional trades and find that year-end price inflation derives...

Firms increasingly issue shares for the purpose of cash savings. During the 1970s, $1.00 of issuance resulted in $0.23 of cash savings; over the most recent decade $1.00 of issuance resulted in $0.60 of cash savings. This increase is caused by increasing precautionary motives. Proxies for...

Consistent with a costly arbitrage equilibrium in which arbitrage costs insulate mispricing, this study finds that mutual fund managers have stock-picking ability for stocks with high idiosyncratic volatility but not for stocks with low idiosyncratic volatility. These findings suggest that fund...

Previous studies have shown that high short interest stocks have low subsequent returns. We test whether the persistence of this effect is due to costs limiting arbitrage. The arbitrage cost that we focus on is idiosyncratic risk which, regardless of the arbitrageur's level of diversification,...

I test whether the persistence of the momentum and reversal effects is the result of idiosyncratic risk limiting arbitrage. Idiosyncratic deters arbitrage, regardless of the arbitrageur's level of diversification. Reversal is prevalent only in high idiosyncratic risk stocks, suggesting that...

Taxes have a first-order impact on portfolio returns. Most research mistakenly assumes that portfolios command similar tax burdens, or that tax burdens are proportional to dividend yields. Portfolio strategies differ in the pace of capital gains realization. We use the federal tax codes from...

Transaction and holding costs make arbitrage costly. If some traders are rational, mispricing will only exist to the extent that arbitrage costs prevent rational traders from fully eliminating inefficiencies. Although the relation between mispricing and transaction costs is well-known, the...

If investors are rational, the variance of closed-end mutual fund returns should equal the variance of the underlying securities in their portfolios. In fact, this paper shows that the average closed-end fund's monthly return is 64 percent more volatile than its assets. Unlike variance- bound...

The average closed-end fund's return is shown to be 65% more volatile than its assets. Unlike variance-bound tests, this facilitates an excess volatility test that does not rely on strong assumptions about discount rates or dividend streams. This finding can not be attributed to non-synchronous...