Paolo Pasquariello

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We study the impact of accounting quality on financial contracting by examining the price and non-price features of loan contracts at the time of loan origination. Borrower accounting quality, measured using standard models of unsigned abnormal accruals, has a significant economic impact on the loan contract terms. Lower accounting quality borrowers face(More)
Using a unique high-frequency futures dataset, we characterize the response of U.S., German and British stock, bond and foreign exchange markets to real-time U.S. macroeconomic news. We find that news produces conditional mean jumps; hence high-frequency stock, bond and exchange rate dynamics are linked to fundamentals. Equity markets, moreover, react(More)
Securities litigation poses large costs to firms. The risk of litigation is heightened when firms have unexpected large earnings disappointments. Previous literature presents mixed evidence on whether voluntary disclosure of bad news prior to regularly scheduled earnings announcements deters or triggers litigation. We show that this conflicting evidence can(More)
We study the role played by private and public information in the process of price formation in the U.S. Treasury bond market. To guide our analysis, we develop a parsimonious model of speculative trading in the presence of two realistic market frictions – information heterogeneity and imperfect competition among informed traders – and a public signal. We(More)
Using a novel information asymmetry index based on measures of adverse selection developed by the market microstructure literature, we test whether information asymmetry is an important determinant of capital structure decisions, as suggested by the pecking order theory. Our index relies exclusively on measures of the market’s assessment of adverse(More)
The authors greatly benefited from discussions with Frank de Jong, Francis Diebold, Andrea Frazzini, Eric Ghysels, Antonio Moreno, Theo Nijman, Paolo Pasquariello, Ralph Koijen, Peter Schotman, Allan Timmermann, Bas Werker, Jeffrey Wurgler, Raf Wouters and seminar participants at the Bank of England, the AFA 2009 Meetings in San Francisco, the EFMA 2008(More)
This paper sheds light on a puzzling pattern in foreign exchange markets: Domestic currencies appreciate (depreciate) systematically during foreign (domestic) working hours. These time-of-day patterns are statistically and economically highly significant. They pervasively persist across many years, even after accounting for calendar effects. This phenomenon(More)
We study equilibrium trading strategies and market quality in an economy in which speculators display preferences consistent with Prospect Theory (Kahneman and Tversky, [39]; Tversky and Kahneman, [63]), i.e., loss aversion and mild risk seeking in losses. Loss aversion (risk seeking in losses) induces speculators to trade less (more), and less cautiously(More)