Financial distress has a dual effect on stock pricing: it affects both investors’ expected return and stock pricing efficiency. Therefore, the estimated relation between it and realized return captures both the relation between it and expected return and the relation between it and the...

The estimated relation between idiosyncratic volatility and realized return captures its relations with both expected return and the mispricing-related component due to its dual effect on stock pricing. The sign of its relation with the mispricing-related component is indeterminate. Empirically,...

The stocks of firms with poor accounting information quality (AIQ) comove least, as gauged by the correlation between returns on two stocks. Only undiversifiable risk is rewarded with a premium and the undiversifiable risk of a diversified stock portfolio increases with correlations between the...

PurposeThis study aims to examine what underlies the estimated relation between idiosyncratic volatility and realized return.Design/methodology/approachIdiosyncratic volatility has a dual effect on stock pricing: it not only affects investors' expected return but also affects the efficiency of...

This study examines how institutional investor investment horizons impact stock price crash risk for China's A-share firms from 2007 to 2019. Long-term investments by institutions significantly mitigate risk by curbing managerial myopia, enhancing transparency, and improving accountability, thus...

Using monthly data from 01/1985 to 12/2012, we find that the accounting valuation-based predictor introduced in Lee, Myers, and Swaminathan (1999) has excellent in-sample and out-of-sample predictive performance. Our finding suggests that the accounting valuation-based predictor does not suffer...

Because stock price generally deviates from the intrinsic value, stock price is a noisy indicator of the intrinsic value. As an expected return proxy, the implied cost of capital (ICC)—the internal rate of return that equates the noisy stock price to discounted expected future dividends—thus...