Erik Stafford

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This paper examines asset fire sales, and institutional price pressure more generally, in equity markets, using market prices of mutual fund liquidations caused by capital flows from 1980 to 2003. Forced transactions are a significant cost of financial distress for mutual funds. We find that buyers in asset fire sales earn highly significant returns for(More)
I use a vector autoregressive model ~VAR! to decompose an individual firm’s stock return into two components: changes in cash-f low expectations ~i.e., cash-f low news! and changes in discount rates ~i.e., expected-return news!. The VAR yields three main results. First, firm-level stock returns are mainly driven by cash-f low news. For a typical stock, the(More)
Statistical inference in long-horizon event studies has been hampered by the fact that abnormal returns are neither normally distributed nor independent. This study presents a new approach to inference that overcomes these difficulties and dominates other popular testing methods. I illustrate the use of the methodology by examining the long-horizon returns(More)
T he essence of structured finance activities is the pooling of economic assets like loans, bonds, and mortgages, and the subsequent issuance of a prioritized capital structure of claims, known as tranches, against these collateral pools. As a result of the prioritization scheme used in structuring claims, many of the manufactured tranches are far safer(More)
We argue that time variation in the maturity of corporate debt arises because firms behave as macro liquidity providers, absorbing the supply shocks associated with changes in the maturity structure of government debt. We document that when the government funds itself with more short-term debt, firms fill the resulting gap by issuing more long-term debt,(More)
A large body of literature suggests that firm-level stock prices “underreact” to news about future cash flows. We estimate a vector autoregession to examine the joint behavior of returns, cash-flow news, and trading between individuals and institutions. Our main finding is that institutions buy shares from individuals in response to good cash-flow news,(More)
  • RONNIE SADKA, ANNA SCHERBINA, +12 authors Tuomo Vuolteenaho
  • 2006
This paper documents a close link between mispricing and liquidity by investigating stocks with high analyst disagreement. Previous research finds that these stocks tend to be overpriced, but that prices correct downwards as uncertainty about earnings is resolved. Our analysis suggests that one reason mispricing has persisted through the years is that(More)