[We investigate whether the adverse effects of investors' behavioral biases extend beyond the domain of financial markets to the broad macro-economy. Focusing on the income risk-sharing role of financial markets, we find that risk sharing is higher (more than double) in U.S. states where investors are more sophisticated and exhibit weaker behavioral biases. The potential for risk sharing varies geographically, but states with better risk-sharing opportunities are able to achieve higher levels of risk sharing only when investors in those states are more sophisticated. Collectively, these results indicate that investors' aggregate behavioral biases and their lack of financial sophistication adversely affect the local macro-economy.]

[The existing literature measures the contribution of analyst recommendation changes using average stock-price reactions. With such an approach, recommendation changes can have a significant impact even if no recommendation has a visible stock-price impact. Instead, we call a recommendation change influential only if it affects the stock price of the affected firm visibly. We show that only 12% of recommendation changes are influential. Recommendation changes are more likely to be influential if they are from leader, star, previously influential analysts, issued away from consensus, accompanied by earnings forecasts, and issued on growth, small, high institutional ownership, or high forecast dispersion firms.]

[We analyze a comprehensive set of mergers and acquisitions from SDC data from 1992 through 2009. We do not impose common restrictions such as excluding private bidders, small targets, or deals without a deal value. We show a broader scope of mergers and acquisitions activity than that implied in the literature, which generally oversamples larger deals involving public firms. Further, some of our results differ from the extant literature. For example, the finding that mergers occur in waves is attenuated with a greater presence of smaller and/or non-public firms. Also, acquirers gain in most takeovers despite a threefold decline over the sample period in acquirer returns.]

[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.]

[Does the mutual fund industry lose its best managers to hedge funds? We find that mutual funds are able to retain managers with good performance in the face of competition from a growing hedge fund industry. On the other hand, poor performers are more likely to leave the mutual fund industry. A small fraction of these poor performers find jobs with smaller and younger hedge fund companies, especially when the hedge fund industry is growing rapidly. Analogously, a small fraction of the better-performing mutual fund managers are retained by allowing them to manage a hedge fund side-by-side.]

We investigate whether the adverse effects of investors' behavioral biases extend beyond the domain of financial markets to the broad macro-economy. Focusing on the income risk-sharing role of financial markets, we find that risk sharing is higher (more than double) in U.S. states where investors are more sophisticated and exhibit weaker behavioral biases. The potential for risk sharing varies geographically, but states with better risk-sharing opportunities are able to achieve higher levels of risk sharing only when investors in those states are more sophisticated. Collectively, these results indicate that investors' aggregate behavioral biases and their lack of financial sophistication adversely affect the local macro-economy. The Author 2011. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please e-mail: [email protected]., Oxford University Press.

We analyze a comprehensive set of mergers and acquisitions from SDC data from 1992 through 2009. We do not impose common restrictions such as excluding private bidders, small targets, or deals without a deal value. We show a broader scope of mergers and acquisitions activity than that implied in the literature, which generally oversamples larger deals involving public firms. Further, some of our results differ from the extant literature. For example, the finding that mergers occur in waves is attenuated with a greater presence of smaller and/or non-public firms. Also, acquirers gain in most takeovers despite a threefold decline over the sample period in acquirer returns.

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.

Does the mutual fund industry lose its best managers to hedge funds? We find that mutual funds are able to retain managers with good performance in the face of competition from a growing hedge fund industry. On the other hand, poor performers are more likely to leave the mutual fund industry. A small fraction of these poor performers find jobs with smaller and younger hedge fund companies, especially when the hedge fund industry is growing rapidly. Analogously, a small fraction of the better-performing mutual fund managers are retained by allowing them to manage a hedge fund side-by-side.