Abstract We analyze the supply-side disruptions associated with COVID-19. We find that sectors in which a higher fraction of the workforce is not able to work remotely experienced greater declines in employment and expected revenue growth, worse stock market performance, and higher likelihood of default. The stock market overweights low-exposure industries. Thus, our findings cast light on the disconnect between stock market indices and aggregate outcomes. We combine these ex ante heterogeneous industry exposures with daily financial market data to create a stock return portfolio that tracks news about the supply-side disruptions resulting from the pandemic. (JEL G12, D22, H25, J20, E00)

Abstract We examine empirically the response of bond returns and their volatility to good and bad macroeconomic news during expansions and recessions. We find that macroeconomic announcements are most important when they contain bad news for bond returns in expansions and, to a lesser extent, good news in contractions. In expansions, the bond market responds most strongly to bad news in non-farm payrolls, while in recessions good news about inflation is relatively more important. We also document that macroeconomic news impacts the volatility of bond returns at all maturities by increasing jump intensities and altering the jump size distribution.

Abstract We establish an empirical link between the ex-ante uncertainty about macroeconomic fundamentals and the ex-post resolution of this uncertainty in financial markets. We measure macroeconomic uncertainty using prices of economic derivatives and relate this measure to changes in implied volatilities of stock and bond options when the economic data is released. Higher macroeconomic uncertainty is associated with greater reduction in implied volatilities following the news release. It is also associated with increased volume and decreased open interest in option markets after the release, consistent with market participants using financial options to hedge or speculate on macroeconomic news.

Using a unique set of banking data containing both originally-reported and subsequently-revised financial variables, we study accounting restatements. Our results indicate the worse a bank's financial condition, the more likely it is for originally-reported data to understate financial losses. Also, we find supervisory exams have an important role in uncovering financial problems and prompting accounting restatements to correct loss underreporting. While revisions are directly related to financial difficulties, exam-based restatements are evident at even the earliest stages of deterioration, indicating substantial accounting misstatements—at both banks and other types of companies—can occur well outside severe business circumstances.

Abstract We develop an analytical solution to the dynamic portfolio choice problem of an investor with power utility defined over wealth at a finite horizon, who faces a time-varying investment opportunity set, parameterized using a flexible vector autoregression. We apply this framework to study the horizon effects in the allocations of equity-only investors, who hold a mix of value and growth indices, and a more general investor, who also has access to Treasury bills and bonds. We find that the mean allocation of equity-only investors is heavily tilted towards value stocks at short-horizons, but the magnitude of this tilt declines dramatically with the investment horizon, implying that growth is less risky than value at long horizons. Investors with access to bills and bonds exhibit similar behavior, when value and growth tilts are computed relative to the total equity allocation of the portfolio. However, after accounting for the propensity of these investors to increase their total equity allocation as the horizon increases, the mean value tilt of the optimal allocation is shown to be positive and stable across time.

Abstract I examine whether a strategic focus on data analytics is associated with improvements in firms' internal information quality. Using textual analysis of firm disclosures to identify a data analytics strategy, I first document that firm, leadership, and operating environment characteristics are all important determinants of the decision to adopt a data analytics strategy. I next use operating and financial reporting outcomes to infer whether a data analytics strategy improves internal information quality. I find that a data analytics strategy is associated with enhanced operating efficiency, as adopting firms invest and utilize existing resources more efficiently. I also find that a data analytics strategy is associated with more accurate management forecasts. These results, collectively, are consistent with a data analytics strategy improving firms' internal information quality. Lastly, I corroborate and extend my findings with job postings data, and the results suggest that firm leadership signals their support for data analytics initiatives through disclosure.

We study the relation between hedge fund equity holdings and measures of informational efficiency of stock prices derived from intraday transactions as well as daily data. Our findings support the role of hedge funds as arbitrageurs who reduce mispricing in the market. Hedge funds invest in stocks that are relatively inefficiently priced, and the price efficiency of these stocks improves after hedge funds increase their holdings. Hedge fund ownership contributes more to efficient pricing than ownership by other types of institutional investors. However, stocks held by hedge funds experienced large declines in price efficiency during several liquidity crises.Received July 27, 2016; editorial decision January 07, 2017 by Editor Wayne Ferson.

In this paper, I draw parallels between the literatures on the effects of law on the financial development of countries and on the effects of accounting standards on financial reporting outcomes. My central thesis is that these literatures are complementary in terms of what they have to say about understanding the effects of law, regulations and accounting standards on economic and financial reporting outcomes. Moreover, both literatures suggest that U.S. securities laws and financial reporting standards have taken a more regulatory direction over time. I then take these themes and draw implications for the effects of the adoption of International Financial Reporting Standards (IFRS) around the world at the time of adoption and over time.