We examine how pre-announcement weather conditions near a firm’s major institutional in- vestors affect stock market reactions to firms’ earnings announcements. We find that unpleasant weather experienced by institutional investors leads to more delayed market responses to sub- sequent earnings news. Moreover, unpleasant weather of institutional investors is associated with higher earnings announcement premia. The influence of institutional investors’ weather is robust after controlling for New York City weather, extreme weather conditions, and firm local weather. Additional cross-sectional evidence suggests that the strength of this weather effect is related to institutional investors’ trading behavior.

We find that the level of short interest in a firm's stock significantly predicts future seasoned equity offers (SEOs). The probability of an SEO announcement increases by 34% (decreases by 49%) for firms in the top (bottom) quintile of short interest. We identify a causal impact of short interest on SEO issuance using a novel instrument for short interest based on future litigation filings in close geographical proximity to hedge fund centers. Our findings suggest that corporate decisions can be triggered by the aggregate trading activity of sophisticated outside investors.

Behavioral theories predict that firm valuation dispersion in the cross-section (‘‘dispersion’’) measures aggregate overpricing caused by investor overconfidence and should be negatively related to expected aggregate returns. This paper develops and tests these hypotheses. Consistent with the model predic- tions, I find that measures of dispersion are positively related to aggregate valuations, trading volume, idiosyncratic volatility, past market returns, and current and future investor sentiment indexes. Disper- sion is a strong negative predictor of subsequent short- and long-term market excess returns. Market beta is positively related to stock returns when the beginning-of-period dispersion is low and this rela- tionship reverses when initial dispersion is high. A simple forecast model based on dispersion signifi- cantly outperforms a naive model based on historical equity premium in out-of-sample tests and the predictability is stronger in economic downturns.

Beyond a bias toward local stocks, investors prefer companies in certain cities over others. This study uses the geographic network of investor-followed stocks from stock watchlists to identify intercity investment preferences in China. We measure the city-pair connectivity by its likelihood of sharing an investor in common whose stock watchlist is highly concentrated in the firms of that city pair. We find that a higher connectivity-weighted aggregate stock demand-to-supply ratio across connected cities is associated with higher stock valuations, higher turnover, better liquidity, and lower cost of equity for firms in the focal city. The effects are robust to controls for geographic proximity and the broad investor base, are stronger among small firms, extend to stock return predictability, and imply excess intercity return comovement. Our results suggest that city connectivity revealed on the stock watchlist helps identify network factors in asset pricing.

Culture and experience associate A with superior quality. In the marketing of dual-class IPOs, issuers are mindful of this preference. For years after IPO issuance, inferior voting rights shares labeled Class A enjoy higher market valuations and smaller voting premiums than do Class B shares.

We study how investor composition is related to future return, trading volume, and price volatility in the cross- section of the music-content non-fungible tokens (music NFTs). Our results show that the breadth of NFT ownership negatively predicts weekly collection-level median-price returns and trading counts. In contrast, ownership concentration and the fraction of small wallets are positive predictors. The fraction of large NFT wallets is a bearish signal for future collection floor-price returns. Investor composition measures have weak predictive power on price volatility. Further analysis indicates that an artist’s Spotify presence moderates the predictive power of investor composition for future NFT returns and trading volume, consistent with the notion that reducing information asymmetry helps improve price efficiency.

Many corporate executives believe blockchain technology is broadly scalable and will achieve mainstream adoption, yet there is little evidence of significant shareholder value creation associated with corporate adoption of blockchain technology. We collect a broad sample of firms that invest in blockchain technology and examine the stock price reaction to the “first” public revelation of this news. Initial reac- tions average close to +13% and are followed by reversals over the next 3 months. However, we report a striking differ- ence based on the credibility of the investment. Blockchain investments that are at an advanced stage or are con- firmed in subsequent financial statements are associated with higher initial reactions and little or no reversal. The results suggest that credible corporate strategies involving blockchain technology are viewed favorably by investors.

Using data from 11 major international markets that celebrate six cultural New Year holidays that do not occur on January 1, we find that stock markets tend to outperform in days surrounding a cultural New Year. After controlling for firm characteristics, an average stock earns 2.5% higher abnormal returns across all markets in the month of a cultural New Year relative to other months of the year. Further evidence suggests that positive holiday moods, in conjunction with cash infusions prior to a cultural New Year, produce elevated stock prices, particularly among those stocks most preferred and traded by individual investors.

We study the effects of a direct high-speed rail (HSR) service between two cities on investors and firms in China’s A-share markets. After an HSR introduction, retail investors make more cross-city web searches and block stock purchases of firms in connected cities. An HSR introduction also leads to less comovement among local stocks and more comovement between stocks in connected cities. Firms located in more central cities in the HSR network enjoy higher firm valuation, lower cost of equity, higher turnover, and better liquidity, in part through the channel of increased investor recognition. The HSR effects on capital market outcomes are more pronounced among small firms and when the connected city-pair distance is below 1,500 km, for which HSR is faster than flying. The findings highlight the importance of in-person interactions in financial markets.

We find that institutional investors' local culture of religiosity influences their stock lending decisions and induces short-sale constraints on the underlying stocks. Firms with higher ownerships by blockholders located in more religious counties are associated with higher utilization of lendable shares. This effect is driven by a lower supply of, rather than a higher demand for, lendable shares. Stock lending fees of such firms are higher, and higher short interests of such firms more strongly predict lower future stock returns. Our findings suggest that the cultural norms of institutional investors can create market friction through the stock lending channel.