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Working Paper
Investor Sentiment and the (Discretionary) Accrual-return Relation
Sun, Bo; Jiang, Jiajun; Liu, Qi (2020-09-18)
Discretionary accruals are positively associated with stock returns at the aggregate level but negatively so in the cross section. Using Baker-Wurgler investor sentiment index, we find that a significant presence of sentiment-driven investors is important in accounting for both patterns. We document that the aggregate relation is only prominent during periods of high investor sentiment. Similarly, the cross-section relation is considerably stronger in high-sentiment periods in both economic magnitude and statistical significance. We then embed investor sentiment into a stylized model of ...
International Finance Discussion Papers , Paper 1300

Working Paper
How Markets Process Macro News: The Importance of Investor Attention
Kroner, Niklas (2025-03-26)
I provide evidence that investors' attention allocation plays a critical role in how financial markets incorporate macroeconomic news. Using intraday data, I document a sharp increase in the market reaction to Consumer Price Index (CPI) releases during the 2021-2023 inflation surge. Bond yields, market-implied inflation expectations, and other asset prices exhibit significantly stronger responses to CPI surprises, while reactions to other macroeconomic announcements remain largely unchanged. The joint reactions of these asset prices point to an attention-based explanation–an interpretation ...
Finance and Economics Discussion Series , Paper 2025-022

Journal Article
Deferred cash compensation: enhancing stability in the financial services industry
Mehran, Hamid; Tracy, Joseph (2016-08)
Employees in financial firms are compensated for creating value for the firm, but firms themselves also serve a public interest. This tension can lead to issues that could impose a significant risk to the firm and the public. The authors describe three channels through which deferred cash compensation can mitigate such risk: by promoting a conservative approach to risk, by inducing internal monitoring, and by creating a liquidity buffer. Ultimately, the net contribution of deferred cash pay to financial stability is the sum of the effects of the three channels. The authors argue that a ...
Economic Policy Review , Issue Aug , Pages 61-75

Working Paper
Level Shifts in Beta, Spurious Abnormal Returns and the TARP Announcement
Saxena, Konark; Reeves, Jonathan J.; Prono, Todd; Phin, Andrew (2018-11-30)
Using high frequency data, we develop an event study method to test for level shifts in beta and measure abnormal returns for events that produce such level shifts. Using this method, we estimate abnormal returns for the Troubled Asset Relief Program (TARP) announcement and find that its abnormal returns are largely realized on the first day. The abnormal returns in the remaining post event period, which show up as a drift using standard methodology, are attributed to level shifts in beta.
Finance and Economics Discussion Series , Paper 2018-081

Working Paper
Sluggish news reactions: A combinatorial approach for synchronizing stock jumps
Bouamara, Nabil; Boudt, Kris; Laurent, Sebastien; Neely, Christopher J. (2024-03-26)
Stock prices often react sluggishly to news, producing gradual jumps and jump delays. Econometricians typically treat these sluggish reactions as microstructure effects and settle for a coarse sampling grid to guard against them. Synchronizing mistimed stock returns on a fine sampling grid allows us to better approximate the true common jumps in related stock prices.
Working Papers , Paper 2024-006

Working Paper
The Fed Takes On Corporate Credit Risk: An Analysis of the Efficacy of the SMCCF
Wei, Bin; Gilchrist, Simon; Yue, Vivian Z.; Zakrajšek, Egon (2024-03-01)
This paper evaluates the efficacy of the Secondary Market Corporate Credit Facility, a program designed to stabilize the U.S. corporate bond market during the COVID-19 pandemic. The program announcements on March 23 and April 9, 2020, significantly reduced investment-grade credit spreads across the maturity spectrum—irrespective of the program’s maturity-eligibility criterion—and ultimately restored the normal upward-sloping term structure of credit spreads. The Federal Reserve’s actual purchases reduced credit spreads of eligible bonds 3 basis points more than those of ineligible ...
Working Papers , Paper 24-2

Working Paper
Competitors' Stock Price Reaction to Mass Layoff Announcements
Pinheiro, Roberto; Bordeman, Adam; Kannan, Bharadwaj (2016-04-18)
Using data on layoff announcements by S&P 500 firms, we show that layoff announcements mostly contain industrywide news. Competitors? stock price reactions are positively correlated with the announcer?s returns. This contagion effect is stronger for competitors whose values depend on growth opportunities. When layoff announcements induce positive stock returns to announcers, competitors with positive R&D see a 1.15% increase in their returns. Conversely, when announcements induce negative reactions to announcers, competitors with high sales growth see a reduction of 1.09% in returns. Our ...
Working Papers (Old Series) , Paper 1610

Working Paper
Not so fast: high-frequency financial data for macroeconomic event studies
Ozdagli, Ali K. (2013-12-01)
Over the last decade, it has become increasingly popular to use event studies with intraday asset pricing data to study the effect of macroeconomic events on the economy. The proponents of this approach argue that asset prices react to macroeconomic events very quickly and that if we know the precise timing of a macroeconomic announcement, a very narrow event window around such an announcement (ranging from 30 minutes to 60 minutes) should be sufficiently long and free from contaminating information that might otherwise cause biased estimates in wider event windows. In contrast, this paper ...
Working Papers , Paper 13-19

Report
Leader-Follower Dynamics in Shareholder Activism
Cisternas, Gonzalo; Kolb, Aaron; Viswanathan, S; Cetemen, Doruk (2022-09-01)
Motivated by the rise of hedge fund activism, we consider a leader blockholder and a follower counterpart who first trade in sequence to build their blocks and then intervene in a firm. With endogenous fundamentals and steering dynamics, the leader ceases to trade in an unpredictable way: she buys or sells to induce the follower to acquire a larger block and thus spend more resources to improve firm value. Key is that the activists have correlated private information—initial blocks, firms' fundamentals, or their own productivity—so that prices either overreact or underreact to order ...
Staff Reports , Paper 1030

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