Complicated Firms *

@inproceedings{Cohen2011ComplicatedF,
  title={Complicated Firms *},
  author={Lauren Cohen and Dong Lou},
  year={2011}
}
We exploit a novel setting in which the same piece of information affects two sets of firms: one set of firms requires straightforward processing to update prices, while the other set requires more complicated analyses to incorporate the same piece of information into prices. We document substantial return predictability from the set of easy-to-analyze firms to their more complicated peers. Specifically, a simple portfolio strategy that takes advantage of this straightforward vs. complicated… CONTINUE READING
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