I present evidence of inefficient information processing in equity markets by documenting that negative information withheld by securities analysts is incorporated in stock prices with a significant delay. I estimate the extent of the withheld negative information based on the proportion of analysts who stop revising their annual earnings forecasts. This measure predicts negative earnings surprises and negative price reaction around earnings announcements. It could also be used to generate profitable trading strategies. I show that institutions tend to sell their stock holdings as my measure of unreported negative news increases, thus ameliorating the mispricing.

We show that new managers who take over mutual fund portfolios sell off inherited momentum losers at higher rates than stocks in any other momentum decile, even after adjusting for concurrent trades in these stocks by continuing fund managers. This behavior is observed regardless of fund characteristics and is stronger when new managers are external hires. The tendency of continuing fund managers to hold on to losers could be consistent with either a behavior bias stemming from an inability to ignore the sunk costs associated with the stocks' past underperformance or a conscious desire to protect their careers by not admitting prior mistakes. Furthermore, we present evidence that selling off loser stocks helps improve fund performance.

We classify a unique and comprehensive data set of corporate press releases into topics and study the market reaction to various types of news. While confirming prior findings regarding strong stock price responses to financial news, we also document significant reactions to news about corporate strategy, customers and partners, products and services, management changes, and legal developments. Consistent with regulators' expectations, the level of informational asymmetry in the market declines following most types of press releases. At the same time, return volatility frequently increases in the post-announcement period, which we show can be attributed to higher levels of valuation uncertainty.