This paper uses wavelets to decompose each stock's trading-volume variance into frequency-specific components. We find that stocks dominated by short-run fluctuations in trading volume have abnormal returns that are 1% per month higher than otherwise similar stocks where short-run fluctuations...

How do arbitrageurs find variables that predict returns? If a predictor lasts 30 days or more, then a clever arbitrageur can use his intuition to get the job done. But, what's an arbitrageur supposed to do if a predictor lasts 30 minutes or less? An arbitrageur's intuition is useless if the...

This paper uses wavelets to decompose each stock's trading-volume variance into frequency-specific components. We find that stocks dominated by short-run fluctuations in trading volume have abnormal returns that are 1% per month higher than otherwise similar stocks where short-run fluctuations...

This paper develops a model showing why traders might use coincidences to identify promising investment opportunities that are worth investigating further. The model predicts that, if both National Semiconductor and Sequans Communications realize top-10 returns (i.e., the semiconductor industry...

Companies have overlapping exposures to many different features that might plausibly affect their returns, like whether they're involved in a crowded trade, whether they're mentioned in an M&A rumor, or whether their supplier recently missed an earnings forecast. Yet, at any point in time, only...

The limits-to-arbitrage framework explains how a speculative bubble can be sustained. But, it does not explain how often you should expect one to occur. To do that, you need to model the on/off switch which sporadically amplifies speculator biases, causing arbitrageur constraints to bind and a...

The conventional wisdom is that you must reveal something about how you pick stocks in order to prove that you have stock-picking skill. In this paper I show that, prior to executing any trades, it is possible to prove you have stock-picking skill without revealing any additional information...

All of asset-pricing theory currently stems from one key assumption: price equals expected discounted payoff. And much of what we think we know about discount rates comes from studying a particular kind of expected payoff: the earnings forecasts in analyst reports. Researchers typically access...

This paper applies the Least Absolute Shrinkage and Selection Operator (LASSO) to make rolling 1-minute-ahead return forecasts using the entire cross section of lagged returns as candidate predictors. The LASSO increases both out-of-sample fit and forecast-implied Sharpe ratios. And, this...