In this paper, we employ a Bayesian framework to test the CAPM while explicitly accounting for the unobservability of the true market portfolio. We derive the posterior model odds ratio for comparing the view that the proxy is perfect (exact efficiency) to the view that its correlation with the...

This paper examines the impact on shareholder voting of the mutual fund voting disclosure regulation adopted by the SEC in 2003, using a paired sample of proposals submitted before and after the rule change. We focus on how voting outcomes relate to institutional ownership and the voting...

We use a unique database on the ownership stakes of equity mutual fund directors to analyze whether the directors' incentive structure is related to fund performance. We find that the ownership stakes of both independent and non-independent directors play an economically substantial and...

We investigate how the market for corporate control (external governance) and shareholder activism (internal governance) interact. A portfolio that buys firms with the highest level of takeover vulnerability and shorts firms with the lowest level of takeover vulnerability generates an annualized...

This article applies the methodology of Bai and Ng (2002, 2004) for decomposing panel data into systematic and idiosyncratic components to both stock returns and turnover panels. This approach works well for both returns and turnover, despite the presence of severe heteroscedasticity and...

We investigate the effects of shareholder governance mechanisms on bondholders and document two new findings. First, the impact of shareholder control (proxied by large institutional blockholders) on credit risk depends on takeover vulnerability. Shareholder control is associated with higher...

Standard Fama-French and Carhart models produce economically and statistically significant nonzero alphas even for passive benchmark indices such as the Samp;P 500 and Russell 2000. We find that these alphas primarily arise from the disproportionate weight the Fama-French factors place on small...

We examine how informed traders trade in the option market around news announcements. We show that their profits depend on whether positions are long or short, whether trades take place before or after news releases, and whether events are scheduled or unscheduled. We predict and find that...

We document that stocks that have optimistic (pessimistic) consensus recommendations and are currently held by many short-term institutions exhibit large stock-return reversals: their large past outperformance (underperformance) is followed by large negative (positive) future alphas. The...

We examine how active share—the extent to which a portfolio's holdings differ from its benchmark's holdings—affects the performance, risk management, and flows of bond mutual funds. Measuring active share at both the issue and issuer level, the average bond fund has an issue-level...