Unlike traditional asset categories (e.g., industry classifications) that are generally defined clearly, some groups of stocks are tied to a certain loosely defined “concept” (e.g., e-commerce). When investors find it difficult to analyze ambiguous concept-oriented information, information...

We find that when volume is relatively low, trading volume is primarily driven by attention rather than disagreement. An increase in volume, reflecting heightened attention, can mitigate mispricing stemming from limited attention. In contrast, when volume is relatively high, we find a stronger...

The stakeholder theory of capital structure proposed by Titman (1984) argues that firms will take into account the nonfinancial stakeholders' preferences when making capital structure decisions. In particular, firms selling specialized products will choose a lower leverage ratio. We propose a...

The investor sentiment measures based on market variables underperform those sentiment measures extracted from investor surveys in various applications. By purging the fundamental component out of the market-variable-based sentiment measures thoroughly, we propose a largely contamination-free...

This study evaluates the importance of confirmatory bias and the representativeness in interpreting corporate earnings news. We find that: (i) confirmatory bias and the representativeness heuristic affect how analysts interpret earnings announcements; and (ii) confirmatory bias has greater...