Policy uncertainty can undermine the power of government subsidies to stimulate environmentally friendly research and development. We show that Chinese firms’ green R&D falls as the uncertainty of environmental subsidies rises: Exogenous, weather-driven air pollution variability induces subsidies to fluctuate, and firms in areas with high weather-driven subsidy variability undertake less green R&D and hire fewer technical employees, controlling for the average level of subsidies. Heavy emitters and environmental technology firms are more affected. The results also illustrate how policy uncertainty can arise when policymakers are influenced by conditions that are salient but with causes that are difficult to disentangle.

We construct investor sentiment indices for six major stock markets and decompose them into one global and six local indices. In a validation test, we find that relative sentiment is correlated with the relative prices of dual-listed companies. Global sentiment is a contrarian predictor of country-level returns. Both global and local sentiment are contrarian predictors of the time-series of cross-sectional returns within markets: When sentiment is high, future returns are low on relatively difficult to arbitrage and difficult to value stocks. Private capital flows appear to be one mechanism by which sentiment spreads across markets and forms global sentiment.

We study the stock market effects of the arrival of the three rounds of “stimulus checks” to U.S. taxpayers and the single round of direct payments to Hong Kong citizens. The first two rounds of U.S. checks appear to have increased retail buying and share prices of retail-dominated portfolios. The Hong Kong payments increased overall turnover and share prices on the Hong Kong Stock Exchange. We cannot rule out that these price effects were permanent. The findings raise novel questions about the role of fiscal stimulus in the stock market.

Recent research finds that the stocks that mutual fund managers buy outperform the stocks that they sell (e.g., Chen, Jegadeesh, and Wermers (2000)). We study the nature of this stock-picking ability. We construct measures of trading skill based on how the stocks held and traded by fund managers perform at subsequent corporate earnings announcements. This approach increases the power to detect skilled trading and sheds light on its source. We find that the average fund’s recent buys significantly outperform its recent sells around the next earnings announcement, and that this accounts for a disproportionate fraction of the total abnormal returns to fund trades estimated in prior work. We find that mutual fund trades also forecast earnings surprises. We conclude that mutual fund managers are able to trade profitably in part because they are able to forecast earnings-related fundamentals.