The Journal of Finance

Economic Links and Predictable Returns

Published: 7/19/2008,  Volume: 63,  Issue: 4  |  DOI: 10.1111/j.1540-6261.2008.01379.x  |  Cited by: 1176

LAUREN COHEN, ANDREA FRAZZINI

This paper finds evidence of return predictability across economically linked firms. We test the hypothesis that in the presence of investors subject to attention constraints, stock prices do not promptly incorporate news about economically related firms, generating return predictability across assets. Using a data set of firms' principal customers to identify a set of economically related firms, we show that stock prices do not incorporate news involving related firms, generating predictable subsequent price moves. A long–short equity strategy based on this effect yields monthly alphas of over 150 basis points.

Attracting Flows by Attracting Big Clients

Published: 9/28/2009,  Volume: 64,  Issue: 5  |  DOI: 10.1111/j.1540-6261.2009.01496.x  |  Cited by: 109

LAUREN COHEN, BRENO SCHMIDT

We explore a new channel for attracting inflows using a unique data set of corporate 401(k) retirement plans and their mutual fund family trustees. Families secure substantial inflows by being named trustee. We find that family trustees significantly overweight, and are reluctant to sell, their 401(k) client firm's stock. Trustee overweighting is more pronounced when the relationship is more valuable to the trustee family, and is concentrated in those funds receiving the greatest benefit from the inflows. We quantify this flow benefit and find that inclusion in the 401(k) plan has an economically and statistically large, positive effect on inflows.

Decoding Inside Information

Published: 5/21/2012,  Volume: 67,  Issue: 3  |  DOI: 10.1111/j.1540-6261.2012.01740.x  |  Cited by: 689

LAUREN COHEN, CHRISTOPHER MALLOY, LUKASZ POMORSKI

Exploiting the fact that insiders trade for a variety of reasons, we show that there is predictable, identifiable “routine” insider trading that is not informative about firms’ futures. A portfolio strategy that focuses solely on the remaining “opportunistic” traders yields value‐weighted abnormal returns of 82 basis points per month, while abnormal returns associated with routine traders are essentially zero. The most informed opportunistic traders are local, nonexecutive insiders from geographically concentrated, poorly governed firms. Opportunistic traders are significantly more likely to have SEC enforcement action taken against them, and reduce trading following waves of SEC insider trading enforcement.

Lazy Prices

Published: 2/22/2020,  Volume: 75,  Issue: 3  |  DOI: 10.1111/jofi.12885  |  Cited by: 393

LAUREN COHEN, CHRISTOPHER MALLOY, QUOC NGUYEN

Using the complete history of regular quarterly and annual filings by U.S. corporations, we show that changes to the language and construction of financial reports have strong implications for firms’ future returns and operations. A portfolio that shorts “changers” and buys “nonchangers” earns up to 188 basis points per month in alpha (over 22% per year) in the future. Moreover, changes to 10‐Ks predict future earnings, profitability, future news announcements, and even future firm‐level bankruptcies. Unlike typical underreaction patterns, we find no announcement effect, suggesting that investors are inattentive to these simple changes across the universe of public firms.

Sell‐Side School Ties

Published: 7/15/2010,  Volume: 65,  Issue: 4  |  DOI: 10.1111/j.1540-6261.2010.01574.x  |  Cited by: 693

LAUREN COHEN, ANDREA FRAZZINI, CHRISTOPHER MALLOY

We study the impact of social networks on agents’ ability to gather superior information about firms. Exploiting novel data on the educational background of sell‐side analysts and senior corporate officers, we find that analysts outperform by up to 6.60% per year on their stock recommendations when they have an educational link to the company. Pre‐Reg FD, this school‐tie return premium is 9.36% per year, while post‐Reg FD it is nearly zero. In contrast, in an environment that did not change selective disclosure regulation (the U.K.), the school‐tie premium is large and significant over the entire sample period.

Resident Networks and Corporate Connections: Evidence from World War II Internment Camps

Published: 1/12/2017,  Volume: 72,  Issue: 1  |  DOI: 10.1111/jofi.12407  |  Cited by: 72

LAUREN COHEN, UMIT G. GURUN, CHRISTOPHER MALLOY

Using customs and port authority data, we show that firms are significantly more likely to trade with countries that have a large resident population near their firm headquarters, and that these connected trades are their most valuable international trades. Using the formation of World War II Japanese internment camps to isolate exogenous shocks to local ethnic populations, we identify a causal link between local networks and firm trade. Firms are also more likely to acquire target firms, and report increased segment sales, in connected countries. Our results point to a surprisingly large role of immigrants as economic conduits for firms.

Don't Take Their Word for It: The Misclassification of Bond Mutual Funds

Published: 4/29/2021,  Volume: 76,  Issue: 4  |  DOI: 10.1111/jofi.13023  |  Cited by: 66

HUAIZHI CHEN, LAUREN COHEN, UMIT G. GURUN

We provide evidence that bond fund managers misclassify their holdings, and that these misclassifications have a real and significant impact on investor capital flows. The problem is widespread, resulting in up to 31.4% of funds being misclassified with safer profiles, compared to their true, publicly reported holdings. “Misclassified funds”—those that hold risky bonds but claim to hold safer bonds—appear to on‐average outperform lower risk funds in their peer groups. Within category groups, misclassified funds receive more Morningstar stars and higher investor flows. However, when we correctly classify them based on actual risk, these funds are mediocre performers.

Supply and Demand Shifts in the Shorting Market

Published: 9/4/2007,  Volume: 62,  Issue: 5  |  DOI: 10.1111/j.1540-6261.2007.01269.x  |  Cited by: 388

LAUREN COHEN, KARL B. DIETHER, CHRISTOPHER J. MALLOY

Using proprietary data on stock loan fees and quantities from a large institutional investor, we examine the link between the shorting market and stock prices. Employing a unique identification strategy, we isolate shifts in the supply and demand for shorting. We find that shorting demand is an important predictor of future stock returns: An increase in shorting demand leads to negative abnormal returns of 2.98% in the following month. Second, we show that our results are stronger in environments with less public information flow, suggesting that the shorting market is an important mechanism for private information revelation.

DISTRIBUTIONAL EFFECTS OF THE FEDERAL DEBT

Published: 9/1951,  Volume: 6,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1951.tb04467.x  |  Cited by: 2

Jacob Cohen

INTEGRATING THE REAL AND FINANCIAL VIA THE LINKAGE OF FINANCIAL FLOW

Published: 3/1968,  Volume: 23,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1968.tb02995.x  |  Cited by: 7

Jacob Cohen

THE TREATMENT OF THE MEANS OF PAYMENT IN SOCIAL ACCOUNTING*

Published: 12/1957,  Volume: 12,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1957.tb04157.x  |  Cited by: 0

Jacob Cohen

THE EURO‐DOLLAR, THE COMMON MARKET, AND CURRENCY UNIFICATION*

Published: 12/1963,  Volume: 18,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1963.tb01635.x  |  Cited by: 0

Benjamin J. Cohen

FISCAL POLICY IN JAPAN

Published: 3/1950,  Volume: 5,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1950.tb02474.x  |  Cited by: 0

Jerome B. Cohen

DISCUSSION

Published: 7/1985,  Volume: 40,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1985.tb05009.x  |  Cited by: 0

KALMAN J. COHEN

THE EFFECT OF CASH BUYING AND CREDIT BUYING ON CONSUMER LIQUID SAVINGS*

Published: 3/1962,  Volume: 17,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1962.tb04251.x  |  Cited by: 0

Jacob Cohen, James N. Morgan

LINEAR PROGRAMMING AND OPTIMAL BANK ASSET MANAGEMENT DECISIONS

Published: 5/1967,  Volume: 22,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1967.tb00002.x  |  Cited by: 24

Kalman J. Cohen, Frederick S. Hammer

FACTORS DETERMINING BANK DEPOSIT GROWTH BY STATE: AN EMPIRICAL ANALYSIS*

Published: 3/1965,  Volume: 20,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1965.tb00184.x  |  Cited by: 6

Bruce C. Cohen, George G. Kaufman

The Value Spread

Published: 3/21/2003,  Volume: 58,  Issue: 2  |  DOI: 10.1111/1540-6261.00539  |  Cited by: 404

Randolph B. Cohen, Christopher Polk, Tuomo Vuolteenaho

We decompose the cross‐sectional variance of firms' book‐to‐market ratios using both a long U.S. panel and a shorter international panel. In contrast to typical aggregate time‐series results, transitory cross‐sectional variation in expected 15‐year stock returns causes only a relatively small fraction (20 to 25 percent) of the total cross‐sectional variance. The remaining dispersion can be explained by expected 15‐year profitability and persistence of valuation levels. Furthermore, this fraction appears stable across time and across types of stocks. We also show that the expected return on value‐minus‐growth strategies is atypically high at times when their spread in book‐to‐market ratios is wide.

The Price Is (Almost) Right

Published: 11/25/2009,  Volume: 64,  Issue: 6  |  DOI: 10.1111/j.1540-6261.2009.01516.x  |  Cited by: 123

RANDOLPH B. COHEN, CHRISTOPHER POLK, TUOMO VUOLTEENAHO

Most previous research tests market efficiency using average abnormal trading profits on dynamic trading strategies, and typically rejects the joint hypothesis of market efficiency and an asset pricing model. In contrast, we adopt the perspective of a buy‐and‐hold investor and examine stock price levels. For such an investor, the price level is more relevant than the short‐horizon expected return, and betas of cash flow fundamentals are more important than high‐frequency stock return betas. Our cross‐sectional tests suggest that there exist specifications in which differences in relative price levels of individual stocks can be largely explained by their fundamental betas.

THE VALUATION OF OPTION CONTRACTS AND A TEST OF MARKET EFFICIENCY

Published: 5/1972,  Volume: 27,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1972.tb00969.x  |  Cited by: 45

Jerome B. Cohen, Fischer Black, Myron Scholes

Judging Fund Managers by the Company They Keep

Published: 5/3/2005,  Volume: 60,  Issue: 3  |  DOI: 10.1111/j.1540-6261.2005.00756.x  |  Cited by: 253

RANDOLPH B. COHEN, JOSHUA D. COVAL, ĽUBOŠ PÁSTOR

We develop a performance evaluation approach in which a fund manager's skill is judged by the extent to which the manager's investment decisions resemble the decisions of managers with distinguished performance records. The proposed performance measures use historical returns and holdings of many funds to evaluate the performance of a single fund. Simulations demonstrate that our measures are particularly useful in ranking managers. In an application that relies on such ranking, our measures reveal strong predictability in the returns of U.S. equity funds. Our measures provide information about future fund returns that is not contained in the standard measures.

THE RETURNS GENERATION PROCESS, RETURNS VARIANCE, AND THE EFFECT OF THINNESS IN SECURITIES MARKETS

Published: 3/1978,  Volume: 33,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1978.tb03395.x  |  Cited by: 38

Kalman J. Cohen, Steven F. Maier, Robert A. Schwartz, David K. Whitcomb

LIMIT ORDERS, MARKET STRUCTURE, AND THE RETURNS GENERATION PROCESS

Published: 6/1978,  Volume: 33,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1978.tb02014.x  |  Cited by: 10

Kalman J. Cohen, Steven F. Maier, Robert A. Schwartz, David K. Whitcomb

THE DETERMINANTS OF COMMON STOCK RETURNS VOLATILITY: AN INTERNATIONAL COMPARISON

Published: 5/1976,  Volume: 31,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1976.tb01917.x  |  Cited by: 23

Kalman J. Cohen, Walter L. Ness, Hitoshi Okuda, Robert A. Schwartz, David K. Whitcomb

Implications of Microstructure Theory for Empirical Research on Stock Price Behavior

Published: 5/1980,  Volume: 35,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1980.tb02152.x  |  Cited by: 107

KALMAN J. COHEN, GABRIEL A. HAWAWINI, STEVEN F. MAIER, ROBERT A. SCHWARTZ, DAVID K. WHITCOMB