Defining systematic risk management (SRM) skill as persistently low fund systematic risk, we find evidence of time varying allocation of hedge fund management effort across the business cycle. In weak market states, skilled managers focus on minimization of systematic risk via dynamic reallocations across asset classes at the cost of fund alpha and foregoing market timing opportunities. As markets strengthen, attention shifts to asset selection within consistent asset classes. The superior performance of low systematic risk funds previously documented arises due to the superior asset selection ability of managers in strong market states. Incremental allocations by investors arise due to this superior performance and not due to recognition of SRM skill.

Our study introduces analyst/investor days, a new disclosure medium that allows for private interactions with influential market participants. We also highlight interdependencies in the choice and information content of analyst/investor days and conference presentations, a well-researched disclosure medium that similarly allows for private interactions. Analyst/investor days are less frequent, but with longer duration and greater price impact than conference presentations. They are mostly hosted by firms that already have opportunities to interact with investors at conferences, but whose complex and diverse activities make the short duration and rigid format of a conference presentation an imperfect solution to these firms' information problems. Analyst/investor days and conference presentations tend to occur in different quarters, consistent with their competing for the time and attention of senior management. When these two mediums are scheduled in close temporal proximity to each other, analyst/investor days diminish the information content of conference presentations, but not vice versa, consistent with managers' favoring analyst/investor days over conference presentations as a disclosure medium. JEL Classifications: D82; M41; G11; G12; G14. Data Availability: Data are publicly available from the sources identified in the paper.

DeRosa and Goldstein (hereafter D-G) argue that the appropriate test for a pricing should regard only the sign of a05, the estimated coefficient of the cost change dummy variable (V1) and the sign and magnitude of a7, the estimated coefficient on the interaction term between the cost change dummy variable and the change in variable cost (V1 X AVC). In their words, Since a0 [the intercept term] in equation (2) is the estimated time trend of prices and cannot be uniquely identified with the hypothesis under investigation, it should not be used as evidence of an asymmetry (p. 880, fn. 6). We would argue instead that the magnitude of the intercept term in the price equation lies at the heart of the issue. The intercept term is the empirical manifestation of inflationary inertia, reflecting the expectations of price and wage setters. George Perry has called this phenomenon the inflationary norm. As discussed below, the estimated intercept terms in both crosssectional and time-series price equation studies have been positive and of relatively large magnitude, especially in the 1970's. (D-G's estimated intercept terms are 1.20 and 2.09 for the 1972-76 period.) The alternative configurations of a0 (the intercept term), and a5 (the coefficient on the cost-change dummy variable) are shown in Figure 1. In panel (a), a0 a ,5 = 0 and there is no asymmetry. In panels (b), (c), and (d), the basic result holds: namely, that a given percentage increase in variable cost produces a larger price increase than the decrease in price produced by a cost decrease of the same magnitude. Only in panel (e) does the work in the opposite direction. Generalizing, given a positive value of a0, the basic pricing result holds for all positive values of a5 and for negative values of a5 provided that j a5j > 2ao. Only when I a5 I > 2ao, a5 < 0, does the work in the opposite direction. This latter condition is met neither in our results nor in those reported by D-G.' Our point of agreement with D-G is in their argument that the negative sign on a5, the coefficient on the cost-change dummy variable, is not by itself the appropriate test for the asymmetry. We disagree with them, however, in the degree of importance to be attached to the intercept term.

We assess the static and dynamic implications of alternative market-based policies limiting greenhouse gas emissions in the US cement industry. Our results highlight two countervailing market distortions. First, emissions regulation exacerbates distortions associated with the exercise of market power in the domestic cement market. Second, emissions “leakage” in trade-exposed markets offsets domestic emissions reductions. Taken together, these forces can result in social welfare losses under policy regimes that fully internalize the emissions externality. Market-based policies that incorporate design features to mitigate the exercise of market power and emissions leakage deliver welfare gains when damages from carbon emissions are high.

We document the interrelationship of disclosure policy decisions among firms by providing evidence that the cessation of quarterly management forecast guidance by 656 firms (“stoppers”) during 2004–2009 is associated with a pursuant increase in quarterly forecasts by previously non-forecasting firms in the same industries (“free-riders”). Increased forecasting by free-riders is positively associated with the information loss in the industry (proxied by the number of stoppers in the industry, the strength of previously existing information transfer relations between stoppers and free-riders, and whether stoppers and free-riders are peer firms) and the importance of the information loss to the free-riders (proxied by analyst following and the existence of new share issues). Following the cessation event, free-riders' cost of capital decreases as a function of the extent to which free-riders immediately initiate quarterly forecasting. JEL Classifications: M41. Data Availability: Data are available from the sources indicated in the text.

We consider a decision maker who ranks actions according to the smooth ambiguity criterion of Klibanoff, Marinacci, and Mukerji (2005). An action is justifiable if it is a best reply to some belief over probabilistic models. We show that higher ambiguity aversion expands the set of justifiable actions. A similar result holds for risk aversion. Our results follow from a generalization of the duality lemma of Wald (1949) and Pearce (1984). [web URL: http://onlinelibrary.wiley.com/doi/10.3982/ECTA14429/abstract]

We assess the role of both accruals manipulation (AM) and real activities manipulation (RAM) in inducing overvaluation at the time of a seasoned equity offering (SEO). Our results reveal that earnings management is most consistently and predictably linked with post-SEO stock market underperformance when it is driven by RAM; in particular, the opportunistic reduction of expenditures on R&D and selling, general, and administrative activities. Thus, overvaluation at the time of the SEO is more likely when managers actively engage in more opaque channels to overstate earnings. Our findings are particularly relevant because managers exhibit a greater propensity for RAM at the time of SEOs, even though RAM is more costly in the long run.

We develop a model of performance evaluation and fund flows for mutual funds in a family. Family performance has two effects on a member fund's estimated skill and inflows: a positive common‐skill effect, and a negative correlated‐noise effect. The overall spillover can be either positive or negative, depending on the weight of common skill and correlation of noise in returns. Its absolute value increases with family size, and declines over time. The sensitivity of flows to a fund's own performance is affected accordingly. Empirical estimates of fund flow sensitivities show patterns consistent with rational cross‐fund learning within families.

Previous theoretical arguments suggest that industrial diversification provides a co-insurance effect that decreases the firm's default risk. In this paper, we endogenously estimate a firm's segment disclosure quality and investigate whether the quality of segment disclosures significantly affects bond investors' assessment of the co-insurance effect of diversification. We document that bonds issued by industrially diversified firms with high-quality segment disclosures have significantly lower yields than bonds issued by diversified firms with low-quality segment disclosures. We also find that the negative relation between industrial diversification and bond yields becomes stronger when firms improve segment disclosures as a result of FAS 131. Finally, we show that high-quality segment disclosures are associated with lower syndicated loan spreads for a subsample of loans issued by large bank syndicates, which are more likely to rely on publicly reported segment information.

In a recent contribution to the AER, Koopman, Wang, and Wei (2014) proposed a decomposition of a country's gross exports into value-added components and double-counted terms. It is motivated by complex manipulation of basic accounting identities. In this comment we provide an alternative framework based on “hypothetical extraction.” This parsimonious approach provides a clear definition of domestic value added in exports and has a natural extension into decompositions of bilateral export flows.