<heading id="h1" level="1" implicit="yes" format="display">ABSTRACT</heading>A principal-components analysis demonstrates that common earnings factors explain a substantial portion of firm-level earnings variation, implying earnings shocks have substantial systematic components and are not almost fully diversifiable as prior literature has concluded. Furthermore,...

This paper studies the effects of predictability on the earnings-returns relation for individual firms and for the aggregate. We demonstrate that prices better anticipate earnings growth at the aggregate level than at the firm level, which implies that random-walk models are inappropriate for...

This paper examines the relationship between debt contracts and state contract law. We first develop an index to evaluate whether each state’s law is favorable or unfavorable to lenders. We then analyze how the contract terms, the frequency of covenant violations, and the repercussions of...

This article studies the effects of accounting fraud on the product market. The model presented in this article relies on the idea that a firm's financial statements and actions must be consistent with each other. If the firm is behaving fraudulently, insofar as its financial statements portray...

In an efficient capital market, asset prices vary when investors change their expectations about cash flows, discount rates, or both. Using dividends to measure cash flows, previous research shows that the aggregate dividend-price ratio varies due to changes in expected discount rates (returns)...

This paper studies the relation between aggregate stock returns and contemporaneous and future cross-sectional earnings dispersion. We hypothesize that increases in expected earnings dispersion signal increases in uncertainty and increases in unemployment, thereby causing expected returns to...