This study examines the responsiveness of analyst forecasts to current earnings announcements. The results show considerable cross-sectional variation in analyst responsiveness and suggest that this variation is related to the costs and benefits associated with prompt forecast revisions. More importantly, this study finds that with responsive forecast revisions, more of the market reaction takes place in the event window and less in the drift window, suggesting that analyst responsiveness mitigates the post-earnings-announcement drift and facilitates market efficiency.

[We analyze the impact of emerging-market sovereign bonds on emerging-market corporate bonds by examining their spanning enhancement, price discovery, and issuance effects. We find that the effect of spanning enhancement is positive and large; over one-fifth of the information in corporate yield spreads is traced to innovations in sovereign bonds; and most of these effects are due to discovery and spanning of systematic risks. Further, issuance of sovereign bonds, controlling for endogeneity of market-timing decisions, lowers corporate yield and bid-ask spreads. Our results indicate that sovereign securities act as benchmarks and suggest they promote a vibrant corporate bond market.]

We analyze the impact of emerging-market sovereign bonds on emerging-market corporate bonds by examining their spanning enhancement, price discovery, and issuance effects. We find that the effect of spanning enhancement is positive and large; over one-fifth of the information in corporate yield spreads is traced to innovations in sovereign bonds; and most of these effects are due to discovery and spanning of systematic risks. Further, issuance of sovereign bonds, controlling for endogeneity of market-timing decisions, lowers corporate yield and bid-ask spreads. Our results indicate that sovereign securities act as benchmarks and suggest they promote a vibrant corporate bond market.

Feedback effects from asset prices to firm cash flows have been empirically documented. This finding raises a question for asset pricing: How are asset prices determined if price affects fundamental value, which in turn affects price? In this environment, by buying assets that others are buying, investors ensure high future cash flows for the firm and subsequent high returns for themselves. Hence, investors have an incentive to coordinate, which may generate self‐fulfilling beliefs and multiple equilibria. Using insights from global games, we pin down investors' beliefs, analyze equilibrium prices, and show that strong feedback leads to higher excess volatility.

Mutual funds have emerged and rapidly developed since 2000 in China. This study tests empirically the impact of mutual funds’ ownership on firm performance in China, using a large sample for the period of 2001–2005. We find that equity ownership by mutual funds has a positive effect on firm performance. The result is robust to several measures of firm performance and various estimations. Our finding supports recent regulatory efforts in China to promote mutual funds as a corporate governance mechanism and suggests that pooling diffuse minority interests of individual shareholders who are prone to free-rider problems via mutual funds is beneficial.