The gambler's fallacy (Rabin, 2002) predicts that trends bias investor expectations. Consistent with this prediction, we find that investors underreact to streaks of consecutive earnings surprises with the same sign. When the most recent earnings surprise extends a streak, post-earnings...

Consistent with the predictions of Wang (1994), we document that firm-specific informed trading is an important determinant of price momentum. The stronger return continuation in stocks with more informed trading cannot be explained by cross-sectional differences in uncertainty proxies such as...

We demonstrate that stock price momentum and earnings momentum can result from uncertainty surrounding the accuracy of cashflow forecasts. Our model has multiple information sources issuing cashflow forecasts for a stock. The investor combines these forecasts into an aggregate cashflow estimate...

Statistical arbitrage enables tests of market efficiency which circumvent the joint-hypotheses dilemma. This paper makes several contributions to the statistical arbitrage framework. First, we enlarge the set of statistical arbitrage opportunities in Hogan, Jarrow, Teo, and Warachka (2004) to...

This paper introduces the concept of statistical arbitrage, a long horizon trading opportunity that generates a riskless profit and is designed to exploit persistent anomalies. Statistical arbitrage circumvents the quot;joint hypothesisquot; dilemma of traditional market efficiency tests because...

Tobin's q is often used to proxy for firm performance when studying the relation between corporate governance and firm performance. However, our theoretical and empirical analysis demonstrate that Tobin's q does not measure firm performance since underinvestment increases rather than decreases...

We propose that U.S. cities differ in the value creation by their local firms partly due to differences in city-level openness. As cities differ in their residents' interest in new ideas and new experiences, local firms differ in their ability to experiment with new products and services and...

We evaluate the relative performance of funds by conditioning their returns on the cross-section of portfolio characteristics across fund managers. Our implied procedure circumvents the need to specify benchmark returns or peer funds. Instead, fund-specific benchmarks for measuring selection and...