We examine the association between margin requirements and the market’s efficiency in incorporating firm-specific and market-level public news. Combining the Fed’s 22 changes in margin requirements with a hand-collected sample of earnings announcements between 1934 and 1975, we show that higher margin requirements induce greater delay in incorporating earnings information into prices. We draw similar conclusions when we analyze the Hou and Moskowitz (2005) price delay measure, as well as indirect measures of leverage constraints over recent years. Further tests suggest that, despite the Fed’s expressed intent to curtail excess speculation, higher margin requirements restrict trading by arbitrageurs more than noise traders.

On the day that dividends are paid, we find a significant positive mean abnormal return that is completely reversed over the following days. This dividend pay date effect has strengthened since the 1970s and is consistent with the temporary price pressure hypothesis. The pay date effect is concentrated among stocks with dividend reinvestment plans (DRIPs) and is larger for stocks with a higher dividend yield, greater DRIP participation, and greater limits to arbitrage. Over time, profits from a trading strategy that exploits this behavior are positively related to the dividend yield and spread and negatively associated with aggregate liquidity.

This paper empirically examines the intraday price relationship between S&P 500 futures and the S&P 500 index using minute‐to‐minute data. Three‐stage least‐squares regression is used to estimate lead and lag relationships with estimates for expiration days of the S&P 500 futures compared with estimates for days prior to expiration. The results suggest that futures price movements consistently lead index movements by twenty to forty‐five minutes while movements in the index rarely affect futures beyond one minute.

A higher frequency of positive overnight returns followed by negative trading day reversals during a month suggests a more intense daily tug of war between opposing investor clienteles, who are likely composed of noise traders overnight and arbitrageurs during the day. We show that a more intense daily tug of war predicts higher future returns in the cross section. Additional tests support the conclusion that, in a more intense tug of war, daytime arbitrageurs are more likely to discount the possibility that positive news arrives overnight and thus overcorrect the persistent upward overnight price pressure.

This study shows that the recent trajectory of a firm's profits predicts future profitability and stock returns. The predictive information contained in the trend of profitability is not subsumed by the level of profitability, earnings momentum, or other well-known determinants of stock returns. The profit trend also predicts the earnings surprise one quarter later, and analyst forecast errors over the following 12 months, suggesting that sophisticated investors underreact to the information in the profit trend. On the other hand, we find no evidence of investor overreaction, and our results cannot be explained by well-known risk factors.

We examine the relation between insiders’ investment horizon and the information content of their trades with respect to future stock returns. We conjecture that an insider's investment horizon establishes a benchmark for expected patterns of continued trading behavior and thus helps identify unexpected insider trades, which should be more informative in efficient markets. Consistent with this conjecture, the trades of short‐horizon insiders are both more unexpected and more informed, on average, than those of long‐horizon insiders. Short‐horizon insiders and their firms also tend to display characteristics that are associated with a greater focus on short‐termism.

We find a strong tendency for positive returns during the overnight period followed by reversals during the trading day. This behavior is driven by an opening price that is high relative to intraday prices. It is concentrated among stocks that have recently attracted the attention of retail investors, it is more pronounced for stocks that are difficult to value and costly to arbitrage, and it is greater during periods of high overall retail investor sentiment. The additional implicit transaction costs for retail traders who buy high-attention stocks near the open frequently exceed the effective half spread.