Informational Content, Stock returns, Daily stock returns, Monthly Stock returns

Price reaction, Volume reaction, Earnings Announcements, Information dissemination

Unequal costs of obtaining and processing information may lead to trading of securities and wealth redistributions among investors. Those investors with easy access to information about a firm may be able to profit from prior knowledge of the information before public release. Public policy making bodies such as the SEC have attempted to alleviate this phenomenon by promoting public disclosure of information through litigation and regulation of the trading activities of insiders. Whether these procedures have been successful in curtailing trading due to privileged information is still open to debate. Academicians have also been concerned with resolving the existence of asymmetrically distributed information and “efficient markets.” In spite of the social and academic importance of this phenomenon, there has been little empirical work in this area. This is primarily due to a lack of a testable theoretical framework explaining investor behavior in securities markets with asymmetric information distribution. The ensuing paper provides a tentative testable theory on trading in markets with asymmetrically distributed information as well as an empirical investigation of this theory.

Inventory valuation, LIFO, FIFO, Inventory costing

The effect of dividends on the valuation of securities has been a controversial subject in financial research in recent years. Since Miller and Modigliani [8] demonstrated the irrelevance of dividend policy, researchers have tested and attempted to explain market price reaction to firms’ dividend decisions. Explanations of market reactions to dividend policyhave centered around information issues and tax effects. Information issues have been empirically investigated by examining market reactions to announcements of dividend changes. The effect of differential tax treatments of dividends and capital gains usually has been examined through cross-sectional regression testing the significance of dividend yield in explaining returns. Any market return study of dividends, however, should consider both the potential information effect and the tax effect.

This study examines the relationship between information announcements and bid/ask spreads. The results indicate no significant changes in bid/ask spreads surrounding quarterly earnings announcements, but significant increases in the size of bid/ask spreads are found on the day of large price changes.

We examine the investment characteristics of firms electing to enter bankruptcy, between 1973 and 1982. Comparisons are made before and after the Bankruptcy Reform Act of 1978. Our results indicate that the 1978 Act had no significant impact on bankruptcy decisions or resolutions for actively traded firms. Trading in bankrupt firms' securities is becoming more common, but no abnormal returns appear to be available. Systematic risk does not change significantly with the filing of bankruptcy, but there is a significant increase in return variance. The financial markets also react to various announcements of stages in the reorganization process.

[This article describes hybrid convertible debentures and how these debentures are currently accounted for, and it proposes an alternative approach for accounting for these debentures. Hybrid convertible debentures are similar to typical convertible debentures in form, but they differ in substance and should be given different accounting treatment.]

Cross-sectional and time series tests are performed to explain levels and changes in short interest. Explanatory variables and tests are chosen based on tax, arbitrage, and speculative reasons for going short. Short interest is found to follow a seasonal pattern that is weakly consistent with tax-based trading. Stocks with high betas and the existence of convertible securities or options tend to have higher levels of short interest, which is consistent with arbitrage efforts. For firms with traded options, there is a positive association between the month-to-month changes in option open interest and short interest. Prior months' returns and changes in short interest are positively related, but there is no relationship between changes in short interest and returns in the subsequent month.