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This paper investigates the relation between stock liquidity and firm performance. The study shows that firms with liquid stocks have better performance as measured by the firm market-to-book ratio. This result is robust to the inclusion of industry or firm fixed effects, a control for idiosyncratic risk, a control for endogenous liquidity using two-stage(More)
We investigate the implications of time-varying expected return and volatility on asset allocation in a high-dimensional setting. We propose a DFMSV model that allows the first two moments of returns to vary over time for a large number of assets. We then evaluate the economic significance of the DFMSV model by examining the performance of various dynamic(More)
Miller [1977. Risk, uncertainty, and divergence of opinion. Journal of Finance 32, 1151–1168] hypothesizes that prices of stocks subject to high differences of opinion and short-sales constraints are biased upward. We expect earnings announcements to reduce differences of opinion among investors, and consequently, these announcements should reduce(More)
Prior work has identified binding credit constraints during recessions. We assess whether corporate diversification alleviates these constraints. We use relative-to-industry growth in sales and growth in inventories as measures of a firm’s ability to fund its activities. We find that during recessions, industry-adjusted sales growth rates drop more for(More)
We examine the effect of industry life-cycle stages on within-industry acquisitions and capital expenditures by conglomerates and single-segment firms controlling for endogeneity of organizational form. We find greater differences in acquisitions than in capital expenditures, which are similar across organizational types. In particular, 36% of the growth(More)
We examine product market behavior of retailers to determine if diversified or focused firms behave as weak competitors and are perceived as such. We do so in three distinct ways. We first test pricing predictions of a simple switching cost model of market competition, that weaker firms charge higher prices in equilibrium (and sacrifice market share). Not(More)
This paper investigates the relation between stock liquidity and firm performance. We find that firms with liquid stocks have better firm performance as measured by the market-to-book ratio. This result holds even when we include industry or firm fixed effects, control for idiosyncratic risk, control for endogenous liquidity with instrumental variables, or(More)
We examine the relation between stock returns and turnover of institutional ownership. Based on ten portfolios, we find that the portfolio of stocks with the highest turnover of institutional ownership earns 8.9% lower subsequent one-year returns than the portfolio of stocks with the lowest turnover of institutional ownership. These findings are consistent(More)
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