This paper documents a link between trading and diversi cation by using detailed trading records from a Swedish discount broker matched to individual tax records. Investors' diversification is measured by stake size, defined as the fraction of their risky financial wealth invested in individual...

To test recent theories that suggest valuation errors affect merger activity, we develop a decomposition that breaks M/B into three components: the firm-specific pricing deviation from short-run industry pricing; sector-wide, short-run deviations from firms' long-run pricing; and long-run...

This paper analyzes the amount of information that can be extracted from stock prices around takeover contests. The first part of the paper shows that it is not generally possible to use target and bidder stock price movements to infer the market's estimates of synergies, bidder overpayment, and...

This paper investigates the capital structure choices that firms make in their initial year of operation, using restricted-access data from the Kauffman Firm Survey. Contrary to many accounts of startup activity, the firms in our data rely heavily on external debt sources such as bank financing,...

To test recent theories that suggest valuation errors affect merger activity, we develop a decomposition that breaks M/B into three components: the firm-specific pricing deviation from short-run industry pricing; sector-wide, short-run deviations from firms' long-run pricing; and long-run...

We create a novel measure of optimism using the Survey of Consumer Finance by comparing self-reported life expectancy to that implied by statistical tables. This measure of optimism correlates with positive beliefs about future economic conditions and with psychometric tests of optimism....

This paper presents some of the first large-scale survey evidence linking optimism to major economic choices. We create a novel measure of optimism using the Survey of Consumer Finance by comparing a person's self-reported life expectancy to that implied by statistical tables. Optimists are more...

Firms in more concentrated industries earn lower returns, even after controlling for size, book-to-market, momentum, and other return determinants. Explanations based on chance, measurement error, capital structure, and persistent, in-sample, cash flow shocks do not explain this finding. Drawing...

Mergers are the mechanisms that redraw the boundaries of the firm. In this paper, we relate incomplete contracts, upon which much of our understanding of firm boundaries is based, to empirical regularities in the market for mergers and acquisitions. We begin by empirically challenging...

Strategic alliances are long-term contracts between legally distinct organizations that provide for sharing the costs and benefits of a mutually beneficial activity. In this paper, I develop and test a model that helps explain why firms sometimes prefer alliances over internally organized...