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Working Paper

Predicting Earnings Management

Is accounting information useful to predict when corporate managers intentionally inflate reported earnings for their firms? To answer this, we study a sample of firms that were forced to restate earnings.

Journal Article

Investing in the Asset-Growth Anomaly Across the Globe

Several studies have show that slow-growing companies return more to stock-market investors than fast-growing companies, based on the growth in the book value of companies’ assets.

Working Paper

Balance Sheet Information and Future Stock Returns

A 2004 paper by Hirshleifer, Hou, Teoh and Zhang argues that measuring the level of net operating assets is a superior predictor of a company's future earnings and stock returns. Here, we point out how their claim may be misleading.

Journal Article

The Limits to Arbitrage Revisited: The Accrual and Asset-Growth Anomalies

It is puzzling that such straightforward asset pricing anomalies like the well-publicized accruals and asset-growth effects are seemingly overlooked by investors.

Journal Article

The Low-Volatility Anomaly: Market Evidence on Systemic Risk vs. Mispricing

Researchers have demonstrated a long-term connection between future stock returns and various measures of prior stock price variability.

Journal Article

Betting Against Beta

A basic premise of the capital asset pricing model (CAPM) is that all agents invest in the portfolio with the highest Sharpe ratio, or expected excess return per unit of risk, and leverage or de-leverage this portfolio to suit their risk preferences. However, many investors — such as individuals, pension funds and mutual funds — are constrained in the leverage that they can take, and therefore overweight risky securities instead.

Journal Article

Why Are Earnings Kinky? An Examination of the Earnings Management Explanation

An empirical regularity documented by Hayn (1995) is that there is a ‘‘kink’’ in the earnings distribution: too few firms report small losses and too many firms report small profits.

Working Paper

Time-Varying Leverage Demand and Predictability of Betting-Against-Beta

We test the predictability of betting-against-beta (BAB) strategies and find that they perform better when past market returns have been high.

Working Paper

Earnings Quality and Financial Reporting Credibility: An Empirical Investigation

Firms with extremely high accruals experience subsequent reductions in earnings and are more likely to be subject to SEC enforcement actions. Do analysts anticipate the earnings reductions in their forecasts? We investigate here.

Journal Article

Betting Against Correlation: Testing Theories of the Low-Risk Effect

What drives the low-risk effect? We test whether it's driven by leverage constraints (and thus risk should be measured using beta) or behavioral effects (and thus risk should be measured by idiosyncratic risk).