Abstract We examine whether, in the aggregate, margin debt is associated with the divergence of price from accounting fundamentals. We find that investors increase their margin debt following upward price movements away from accounting fundamentals, consistent with these investors being extrapolative in aggregate. We also find evidence that margin debt appears to be linked to temporary overpricing in recent periods, as the aggregate ratio of margin debt to price is reliably associated with negative future returns since at least 1992. Our results are consistent with the theoretical literature that predicts extrapolative traders have a destabilizing effect on market prices, and helps explain why prices diverge from accounting fundamentals.

ABSTRACT We examine the disclosure of non-GAAP earnings information in quarters containing transitory gains to investigate whether the primary motivation for these managers to disclose non-GAAP earnings is to inform or mislead. In this setting, non-GAAP earnings are more informative than GAAP earnings, even though they are lower than GAAP earnings. Thus, managers motivated to inform stakeholders about sustainable earnings will disclose non-GAAP earnings information excluding the gain, whereas managers motivated to report higher earnings will obscure the transitory nature of the gain by focusing on GAAP earnings. We find evidence that managers' disclosure choices vary widely across firms, and these choices affect investors' perceptions of core operating earnings. We then contrast how the same firm discloses non-GAAP earnings in the presence of transitory losses to provide additional evidence on the motives of individual firms' disclosures. We conclude that the most pervasive motivation to disclose non-GAAP earnings in the presence of transitory gains is to inform. An economically significant proportion of firms, however, appear opportunistic in that they only disclose non-GAAP earnings information when it increases investors' perceptions of core operating earnings. Our evidence is important because we speak to the influence that each motive has on the choice to disclose non-GAAP earnings and we provide evidence on the underlying motives behind specific firms' disclosures. Data Availability: All data are available from the sources cited in the text.

ABSTRACT We use posts on the investor-focused StockTwits social media network to generate new insights regarding investor disagreement, disclosure processing costs, and trading volume around earnings announcements. Using social media-based measures of disagreement, we find that both preannouncement disagreement and increases in disagreement around an earnings announcement are positively associated with trading volume. Drawing upon the disclosure processing costs literature, we provide evidence that the effects of disagreement increase when disclosure processing costs are lower. Our social media measures of disagreement remain significant after including traditional analyst earnings estimate measures of disagreement in the model. Our study provides new evidence on the importance of disclosure processing costs and is consistent with lower disclosure processing costs amplifying both the resolution of preannouncement disagreement and new disagreement about earnings information. Data Availability All data are available from the sources described in the text.