In March 1966 issue of this Review, Belton Fleisher proposed an analytical framework for assessing relationship between income and juvenile delinquency and has attempted to measure effect of income on delinquency. In a series of multiple regression analyses, he finids a general pattern of behavior. . in which the overall effect of income on delinquency appears to be negative... although there is a partial off-setting effect as a result of positive influence of income on payoff for property crimes. He also finds that unemployment appears to be a cause of delinquent behavior... (p. 132), which is consistent with his previous work on subject. Fleisher's results, however, depend heavily on choice of variables used to represent tastes for delinquency. It is purpose of this comment to show that, at least for only set of published data used by Fleisher, which is also data regarded by him as niost useful for investigating delinquency (74 community areas within Chicago): a more accurate measure of one important taste concept is available, and its inclusion substantially alters Fleisher's results. Secondlv, Fleisher's economic variables are highly collinear with additionial variables, reflecting other aspects of taste for delinquency, which might reasona'bly be included in his regressions. XVhen these variables are added, Fleisher's results are further modified and his conclusions, particularlIy those with policy implications, are vitiated.

Using a large dataset of hand-collected information on activist interventions from 2008 to 2014, we examine why certain hedge funds succeed in the face of competition. We document that the top hedge funds succeed, not merely because of how they select targets, but because they acquire a reputation for what we label “clout and expertise.” These hedge funds do not intervene more frequently; to the contrary, activists with more interventions are associated with lower returns. Instead, top activists have a demonstrated ability to succeed in difficult interventions by targeting large firms, launching successful proxy fights, filing and winning lawsuits, pressuring target boards through the media, overcoming anti-takeover defenses, and replacing board members. These activists' successes appear to result more from board representation, improved performance, and monitoring management than from capital structure or dividend policy changes.

We find that firms grant more rank and file stock options when involved in financial reporting violations, consistent with managements’ incentives to discourage employee whistle-blowing. Violating firms grant more rank and file options during periods of misreporting relative to control firms and to their own option grants in non-violation years. Moreover, misreporting firms that grant more rank and file options during violation years are more likely to avoid whistle-blowing allegations. Although the Dodd-Frank Act (2010) offers financial rewards to encourage whistle-blowing, our findings suggest that firms discourage whistle-blowing by giving employees incentives to remain quiet about financial irregularities.

We examine interactions between investment and financing decisions in a dynamic model where the firm can alter the mix of debt and equity financing and exercise a randomly arriving and potentially short lived growth option. The firm will typically finance the exercise of the growth option with equity and may wait years before recapitalizing to a higher debt level. The lack of coordination between the timing of investment and debt financing helps explain a number of findings in the empirical literature, including violation of the financing pecking order, debt conservatism, apparent market timing of security issues, and more pronounced underperformance following equity issues than debt issues.

Firms until recently were effectively constrained to hold liquid assets in non-interest-bearing accounts. As a result, the cost of capital of firms' liquid-assets portfolios exceeded the return, especially when the risk-free interest rate was high. The spread between cost and return is the cost of carry. Changes in the cost of carry explain the dynamics of corporate "cash" holdings both in the United States and abroad, and the level of cost of carry explains the level of liquid-asset holdings across countries. We conclude that current US corporate cash holdings are not abnormal in a historical or international comparison.

We propose a hybrid approach for estimating beta that shrinks rolling window estimates toward firm-specific priors motivated by economic theory. Our method yields superior forecasts of beta that have important practical implications. First, unlike standard rolling window betas, hybrid betas carry a significant price of risk in the cross-section even after controlling for characteristics. Second, the hybrid approach offers statistically and economically significant out-of-sample benefits for investors who use factor models to construct optimal portfolios. We show that the hybrid estimator outperforms existing estimators because shrinkage toward a fundamentals-based prior is effective in reducing measurement noise in extreme beta estimates.

We examine how institutional ownership structure gives rise to limits to arbitrage through its impact on short-sale constraints. Stocks with lower, more concentrated, short-term, and less passive ownership exhibit lower lending supply, higher costs of shorting, and higher arbitrage risk. These constraints limit the ability of arbitrageurs to take short positions and delay the correction of mispricing. Stocks with more concentrated ownership exhibit smaller announcement day reactions, larger post-earnings announcement drift, and an additional negative abnormal return of −0.47% in the week following a positive shorting demand shock.

Abstract This study provides evidence that managers' career concerns affect their earnings guidance decisions. We hypothesize that CEO s who are relatively more concerned about assessments of their abilities have stronger incentives to guide the market expectations of earnings downwards to increase the likelihood of meeting or beating the expectations. Consistent with this hypothesis, we find that (i) short‐tenured CEO s, CEO s promoted from inside the firm, and nonfounder CEO s are more likely to provide downward earnings guidance when they have bad news, and (ii) their downward guidance tends to be more conservative. In response, analysts revise earnings forecasts less for the downward guidance provided by more career‐concerned CEO s. This indicates that analysts rationally incorporate these CEO s' stronger incentives to be conservative in their earnings guidance. Consequently, we find that CEO s with greater career concerns are not more likely to beat the market expectations, even when they provide more conservative downward guidance.

Abstract We test for the presence of a systematic tail risk premium in the cross section of expected returns by applying a measure of the sensitivity of assets to extreme market downturns, the tail beta. Empirically, historical tail betas help predict the future performance of stocks in extreme market downturns. During a market crash, stocks with historically high tail betas suffer losses that are approximately 2 to 3 times larger than their low-tail-beta counterparts. However, we find no evidence of a premium associated with tail betas. The theoretically additive and empirically persistent tail betas can help assess portfolio tail risks.