type="main" <title type="main">ABSTRACT</title> <p>The recent financial crisis shows that financial markets can impact the real economy. We investigate whether access to finance typically time-varies and, if so, what are the real effects. Consistent with time-varying external finance costs, both investment and employment are...</p>

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,...

This paper tests whether the persistence of the momentum and reversal effects is the result of idiosyncratic risk limiting arbitrage. Idiosyncratic risk deters arbitrage, regardless of the arbitrageur’s diversification. Reversal is prevalent only in high idiosyncratic risk stocks, suggesting...

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...

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...