[Using data from 56 markets, we find that short-term reversal, post-earnings drift, and momentum strategies earn similar returns in emerging and developed markets. Variance ratios and market delay measures often show greater deviations from random walk pricing in developed markets. Conceptually, we show that commonly used efficiency tests can yield misleading inferences because they do not control for the information environment. Our evidence corrects misperceptions that emerging markets feature larger trading profits and higher return autocorrelation, highlights crucial limitations of weak and semi-strong form efficiency measures, and points to the importance of measuring informational aspects of efficiency.]

[This article studies differences in the information content of 870,000 news announcements in 56 markets around the world. In most developed markets, a firm's stock price moves much more on days with public news about the firm. In contrast, in many emerging markets volatility is similar on news and non-news days. We examine several hypotheses for our findings. Cross-country differences in stock price reactions are best explained by insider trading, followed by differences in the quality of the news dissemination mechanism. Our findings are useful for quantifying the extent of insider trading and how the financial media affects international markets.]

Widely-cited research by Kamstra et al. (2003) argues that changes in mood resulting from Seasonal Affective Disorder (SAD) drive changes in investor risk aversion and cause seasonal patterns in aggregate stock returns around the world. In this paper we reexamine the so-called SAD effect by replicating and extending Kamstra et al. (2003). We study the psychological underpinnings of the SAD hypothesis and show that the time-series predictions of the SAD model do not correspond to the seasonal patterns in depression found in the general population. We also investigate the cross-sectional prediction that SAD has a greater effect on stock markets in countries where SAD is more prevalent and find no relation between the prevalence of SAD and stock returns. Finally, we document that the SAD effect is mechanically driven by an overlapping dummy-variable specification and higher returns around the turn of the year.

Using data from 56 markets, we find that short-term reversal, post-earnings drift, and momentum strategies earn similar returns in emerging and developed markets. Variance ratios and market delay measures often show greater deviations from random walk pricing in developed markets. Conceptually, we show that commonly used efficiency tests can yield misleading inferences because they do not control for the information environment. Our evidence corrects misperceptions that emerging markets feature larger trading profits and higher return autocorrelation, highlights crucial limitations of weak and semi-strong form efficiency measures, and points to the importance of measuring informational aspects of efficiency.

Using a novel measure of own-investor secrecy, we find that non-disclosure to a fund’s own investors, unlike non-disclosure to the public, does not signal hedge fund skill. Own-investor secretive funds do not significantly outperform transparent funds through an up market, and they significantly underperform their (sub)strategy-matched peers through the down market of the Global Financial Crisis. These results are robust to using factor models and controls for fund illiquidity, complexity, concentration, size, and leverage. These patterns are consistent with funds loading on option-like risks, and additional tests show that secretive funds are exposed to risks akin to put-option writing. Measures of skill proposed by prior research also do not suggest secretive funds possess superior skill. Through the up-market portion of our sample, secretive funds have lower flow-to-performance sensitivity, even controlling for illiquidity, suggesting that investors view secretive and transparent funds differently.

This article studies differences in the information content of 870,000 news announcements in 56 markets around the world. In most developed markets, a firm's stock price moves much more on days with public news about the firm. In contrast, in many emerging markets volatility is similar on news and non-news days. We examine several hypotheses for our findings. Cross-country differences in stock price reactions are best explained by insider trading, followed by differences in the quality of the news dissemination mechanism. Our findings are useful for quantifying the extent of insider trading and how the financial media affects international markets.

We examine the impact of rivals’ competitive activities on firms’ quantity-of-capital constraints in 60 countries. Prior work shows that competition increases the costs of debt and equity, which reduce the economic profit from investment. Capital constraints, however, may prevent firms from exploiting all positive NPV projects. Using unique survey data and several econometric techniques, we address endogeneity problems that affect both capital constraints and rivals’ competitive activities. We find that rivals’ competitive activities are positively associated with firms’ capital constraints and are more strongly correlated with capital constraints than banking sector competition. We also show that quantity-of-capital constraints are negatively related to firm growth, incremental to the cost of capital.