Pub Date : 2026-08-01Epub Date: 2026-07-30DOI: 10.1016/j.jempfin.2026.101754
Jian Yuan, Yiming Zhang
We construct a novel risk-based similarity peer network by applying machine learning techniques to extract a comprehensive set of disclosed risk factors from firms’ annual reports. We find that a firm’s future returns can be significantly predicted by the past returns of its risk-similar peers, even after excluding firms within the same industry. A long–short portfolio, formed based on the returns of these risk-similar peers, generates an alpha of 84 basis points per month. This return predictability is particularly pronounced for small stocks and those with limited investor attention, suggesting that the effect is driven by slow information diffusion across firms with similar risk exposures. Our findings highlight that the risk factors disclosed in 10-K filings contain valuable information that is often overlooked by investors.
{"title":"Risk-based peer networks and return predictability: Evidence from textual analysis on 10-K filings","authors":"Jian Yuan, Yiming Zhang","doi":"10.1016/j.jempfin.2026.101754","DOIUrl":"10.1016/j.jempfin.2026.101754","url":null,"abstract":"<div><div>We construct a novel risk-based similarity peer network by applying machine learning techniques to extract a comprehensive set of disclosed risk factors from firms’ annual reports. We find that a firm’s future returns can be significantly predicted by the past returns of its risk-similar peers, even after excluding firms within the same industry. A long–short portfolio, formed based on the returns of these risk-similar peers, generates an alpha of 84 basis points per month. This return predictability is particularly pronounced for small stocks and those with limited investor attention, suggesting that the effect is driven by slow information diffusion across firms with similar risk exposures. Our findings highlight that the risk factors disclosed in 10-K filings contain valuable information that is often overlooked by investors.</div></div>","PeriodicalId":15704,"journal":{"name":"Journal of Empirical Finance","volume":"88 ","pages":"Article 101754"},"PeriodicalIF":2.5,"publicationDate":"2026-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"148656463","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-08-01Epub Date: 2026-07-20DOI: 10.1016/j.jempfin.2026.101750
Jan Kakes, Jan Willem van den End
We present a metric for excessive spread developments in the Economic and Monetary Union (EMU), based on the dispersion of sovereign spreads relative to macro-financial fundamentals. To allow for time variation in this relationship and isolate the impact of fundamentals, we present rolling regressions that control for the role of market sentiment. The metric shows that the observed dispersion of spreads occasionally overshot the fundamentals-based benchmark for short episodes. Especially during the European debt crisis and the COVID crisis, these periods coincided with interventions by the European Central Bank to stabilize markets. We conclude that those interventions were effective to counteract excessive dispersion of sovereign spreads among EMU countries.
{"title":"Identifying excessive spread dispersion in the euro area: When do sovereign spreads go beyond fundamentals?","authors":"Jan Kakes, Jan Willem van den End","doi":"10.1016/j.jempfin.2026.101750","DOIUrl":"10.1016/j.jempfin.2026.101750","url":null,"abstract":"<div><div>We present a metric for excessive spread developments in the Economic and Monetary Union (EMU), based on the dispersion of sovereign spreads relative to macro-financial fundamentals. To allow for time variation in this relationship and isolate the impact of fundamentals, we present rolling regressions that control for the role of market sentiment. The metric shows that the observed dispersion of spreads occasionally overshot the fundamentals-based benchmark for short episodes. Especially during the European debt crisis and the COVID crisis, these periods coincided with interventions by the European Central Bank to stabilize markets. We conclude that those interventions were effective to counteract excessive dispersion of sovereign spreads among EMU countries.</div></div>","PeriodicalId":15704,"journal":{"name":"Journal of Empirical Finance","volume":"88 ","pages":"Article 101750"},"PeriodicalIF":2.5,"publicationDate":"2026-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"148634270","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-08-01Epub Date: 2026-07-27DOI: 10.1016/j.jempfin.2026.101752
Stefano Mengoli, Pierpaolo Pattitoni
We investigate the reallocation of retail investor attention during firm-specific disruptive events, such as IPOs. While IPOs increase investor attention across listed firms, those geographically and industrially close to the IPO attract the most significant interest. Attention builds up prior to the IPO, peaks during the event, and remains elevated afterward, particularly for geographically proximate firms. Notably, geographic proximity plays a dominant and persistent role, even under firm-specific and market-wide uncertainty. Attention also responds systematically to information, increasing with negative and uncertain tone in IPO prospectuses, consistent with the negativity bias. Conversely, high levels of aggregate market attention divert attention away from IPO events, although this effect is attenuated for geographically proximate firms. We further show that heightened attention is associated with a positive contemporaneous return effect followed by a reversal over longer horizons, consistent with temporary price pressure. Our findings indicate that retail investor attention is allocated in a systematic and economically meaningful way, reflecting the role of local information advantages, social and geographic proximity
{"title":"Spotlight on the neighborhood: The spillover effect of IPOs on retail investor attention","authors":"Stefano Mengoli, Pierpaolo Pattitoni","doi":"10.1016/j.jempfin.2026.101752","DOIUrl":"10.1016/j.jempfin.2026.101752","url":null,"abstract":"<div><div>We investigate the reallocation of retail investor attention during firm-specific disruptive events, such as IPOs. While IPOs increase investor attention across listed firms, those geographically and industrially close to the IPO attract the most significant interest. Attention builds up prior to the IPO, peaks during the event, and remains elevated afterward, particularly for geographically proximate firms. Notably, geographic proximity plays a dominant and persistent role, even under firm-specific and market-wide uncertainty. Attention also responds systematically to information, increasing with negative and uncertain tone in IPO prospectuses, consistent with the negativity bias. Conversely, high levels of aggregate market attention divert attention away from IPO events, although this effect is attenuated for geographically proximate firms. We further show that heightened attention is associated with a positive contemporaneous return effect followed by a reversal over longer horizons, consistent with temporary price pressure. Our findings indicate that retail investor attention is allocated in a systematic and economically meaningful way, reflecting the role of local information advantages, social and geographic proximity</div></div>","PeriodicalId":15704,"journal":{"name":"Journal of Empirical Finance","volume":"88 ","pages":"Article 101752"},"PeriodicalIF":2.5,"publicationDate":"2026-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"148634266","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-08-01Epub Date: 2026-07-25DOI: 10.1016/j.jempfin.2026.101753
Timothy D. Haight, Chengdong Yin
Series investment companies (ICs) are single legal entities that offer multiple segregated investment portfolios, each operating as an individual mutual fund. The series IC structure, which has surpassed the single-fund IC structure in both fund count and assets under management in recent years, significantly affects various fund attributes. As a series IC houses more funds, those funds benefit from greater administrative cost savings, assume less idiosyncratic risk, deliver stronger performance, and attract higher flows. Managers’ strategic behavior at the IC level also affects fund risk-taking and performance.
{"title":"The impact of series investment companies on mutual fund attributes","authors":"Timothy D. Haight, Chengdong Yin","doi":"10.1016/j.jempfin.2026.101753","DOIUrl":"10.1016/j.jempfin.2026.101753","url":null,"abstract":"<div><div>Series investment companies (ICs) are single legal entities that offer multiple segregated investment portfolios, each operating as an individual mutual fund. The series IC structure, which has surpassed the single-fund IC structure in both fund count and assets under management in recent years, significantly affects various fund attributes. As a series IC houses more funds, those funds benefit from greater administrative cost savings, assume less idiosyncratic risk, deliver stronger performance, and attract higher flows. Managers’ strategic behavior at the IC level also affects fund risk-taking and performance.</div></div>","PeriodicalId":15704,"journal":{"name":"Journal of Empirical Finance","volume":"88 ","pages":"Article 101753"},"PeriodicalIF":2.5,"publicationDate":"2026-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"148634269","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-08-01Epub Date: 2026-05-29DOI: 10.1016/j.jempfin.2026.101744
Jingjing Chen, George J. Jiang, Chenye Liu, Dongming Zhu
{"title":"Corrigendum to “Positivity and Long-Lasting Momentum” [Journal of Empirical Finance, volume 87 (2026)/101694]","authors":"Jingjing Chen, George J. Jiang, Chenye Liu, Dongming Zhu","doi":"10.1016/j.jempfin.2026.101744","DOIUrl":"10.1016/j.jempfin.2026.101744","url":null,"abstract":"","PeriodicalId":15704,"journal":{"name":"Journal of Empirical Finance","volume":"88 ","pages":"Article 101744"},"PeriodicalIF":2.5,"publicationDate":"2026-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"148735132","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This study investigates key features of stock returns – including the leverage effect, contemporaneous leverage effect, volatility clustering, and feedback effect – using a vine copula framework. Unlike traditional copula models, our approach enables the joint examination of these features simultaneously, particularly under extreme market conditions when they are most critical for risk management. Based on high-frequency data from major global stock markets and large-cap U.S. firms, we find strong evidence of volatility clustering, characterized by nonlinearity and marked asymmetry: the clusters of high volatility occur more frequently than those of low volatility, with the effect more pronounced for indices than for individual firms. We also identify significant asymmetric leverage and contemporaneous leverage effects, both of which occur only at market downturn. At extremes, the contemporaneous leverage effect is slightly stronger than the leverage effect, suggesting both immediate and persistent volatility responses to adverse news. Moreover, these stylized features intensified during the 2008 financial crisis and the COVID-19 pandemic. Our Value at Risk (VaR) analysis and backtesting further demonstrate the superior performance of the vine copula model relative to linear dependence models and pair copula alternatives. These findings provide important insights for enhancing risk management practices and improving option pricing.
{"title":"Are the stylized features of stock returns the same in market downturns and upturns?","authors":"Bowen Cheng , Wanling Huang , Cathy Ning , Dinghai Xu","doi":"10.1016/j.jempfin.2026.101695","DOIUrl":"10.1016/j.jempfin.2026.101695","url":null,"abstract":"<div><div>This study investigates key features of stock returns – including the leverage effect, contemporaneous leverage effect, volatility clustering, and feedback effect – using a vine copula framework. Unlike traditional copula models, our approach enables the joint examination of these features simultaneously, particularly under extreme market conditions when they are most critical for risk management. Based on high-frequency data from major global stock markets and large-cap U.S. firms, we find strong evidence of volatility clustering, characterized by nonlinearity and marked asymmetry: the clusters of high volatility occur more frequently than those of low volatility, with the effect more pronounced for indices than for individual firms. We also identify significant asymmetric leverage and contemporaneous leverage effects, both of which occur only at market downturn. At extremes, the contemporaneous leverage effect is slightly stronger than the leverage effect, suggesting both immediate and persistent volatility responses to adverse news. Moreover, these stylized features intensified during the 2008 financial crisis and the COVID-19 pandemic. Our Value at Risk (VaR) analysis and backtesting further demonstrate the superior performance of the vine copula model relative to linear dependence models and pair copula alternatives. These findings provide important insights for enhancing risk management practices and improving option pricing.</div></div>","PeriodicalId":15704,"journal":{"name":"Journal of Empirical Finance","volume":"87 ","pages":"Article 101695"},"PeriodicalIF":2.4,"publicationDate":"2026-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"146192397","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-06-01Epub Date: 2026-02-04DOI: 10.1016/j.jempfin.2026.101690
Brent W. Ambrose , Yifan Chen , Timothy T. Simin
We investigate the value-growth premium puzzle by merging insights from urban economics and finance that relate firm location to its stock performance. The value-growth premium in locations with high historical house price appreciation is 3.6% per year larger than the premium in areas that experienced little house price appreciation. The results support investment-based models explaining the value premium; moreover, we find the house price channel reduces returns of growth firms rather than increasing returns of value firms. House price appreciation remains significant after controlling for common explanations of the premium.
{"title":"Firm location and the value-growth premium","authors":"Brent W. Ambrose , Yifan Chen , Timothy T. Simin","doi":"10.1016/j.jempfin.2026.101690","DOIUrl":"10.1016/j.jempfin.2026.101690","url":null,"abstract":"<div><div>We investigate the value-growth premium puzzle by merging insights from urban economics and finance that relate firm location to its stock performance. The value-growth premium in locations with high historical house price appreciation is 3.6% per year larger than the premium in areas that experienced little house price appreciation. The results support investment-based models explaining the value premium; moreover, we find the house price channel reduces returns of growth firms rather than increasing returns of value firms. House price appreciation remains significant after controlling for common explanations of the premium.</div></div>","PeriodicalId":15704,"journal":{"name":"Journal of Empirical Finance","volume":"87 ","pages":"Article 101690"},"PeriodicalIF":2.4,"publicationDate":"2026-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"146192399","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-06-01Epub Date: 2026-01-29DOI: 10.1016/j.jempfin.2026.101694
Jingjing Chen , George J. Jiang , Chenye Liu , Dongming Zhu
We propose a simple momentum indicator positivity, defined as the percentage of days with non-negative returns, and show that it has a strong predictive power for stock returns over long horizons up to five years. The return-predictive power outlasts other conventional momentum indicators, including past stock returns and stock return consistency. We show that winners identified by positivity are young small-medium value firms, with relatively low sales growth but high earnings growth and robust fundamentals. Moreover, we show that in contrast to volatile “glamorous” growth stocks, these steady value stocks receive less attention of short-term speculative and noise traders and have modest valuation. Finally, we show that the long-lasting momentum of high positivity stocks is justified by persistent superior fundamental performance.
{"title":"Positivity and long-lasting momentum","authors":"Jingjing Chen , George J. Jiang , Chenye Liu , Dongming Zhu","doi":"10.1016/j.jempfin.2026.101694","DOIUrl":"10.1016/j.jempfin.2026.101694","url":null,"abstract":"<div><div>We propose a simple momentum indicator <em>positivity</em>, defined as the percentage of days with non-negative returns, and show that it has a strong predictive power for stock returns over long horizons up to five years. The return-predictive power outlasts other conventional momentum indicators, including past stock returns and stock return consistency. We show that winners identified by positivity are young small-medium value firms, with relatively low sales growth but high earnings growth and robust fundamentals. Moreover, we show that in contrast to volatile “glamorous” growth stocks, these steady value stocks receive less attention of short-term speculative and noise traders and have modest valuation. Finally, we show that the long-lasting momentum of high positivity stocks is justified by persistent superior fundamental performance.</div></div>","PeriodicalId":15704,"journal":{"name":"Journal of Empirical Finance","volume":"87 ","pages":"Article 101694"},"PeriodicalIF":2.4,"publicationDate":"2026-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"146122635","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-06-01Epub Date: 2026-02-04DOI: 10.1016/j.jempfin.2026.101693
Yi Zhou , Wenjing Xia , Wuyi Ye
This study introduces a method for computing daily systemic risk measures using high-frequency data, specifically realized conditional value-at-risk (RCoVaR) and realized marginal expected shortfall (RMES). RCoVaR and RMES are empirical estimators derived from scaling high-frequency returns, offering benefits such as model-independence and adaptability to diverse datasets. To mitigate market microstructure noise (MMN) inherent in high-frequency data, we employ overlapping and subsampling approaches in the estimation of RCoVaR and RMES. Empirical analysis focuses on systemic risk within the foreign exchange market. The results indicate that noise-treated RCoVaR and RMES serve as effective alternatives for daily systemic risk estimation. These techniques also enhance out-of-sample predictive accuracy when employed as predictors within systemic risk forecasting frameworks.
{"title":"Measuring daily systemic risk with intraday data: Evidence from foreign exchange market","authors":"Yi Zhou , Wenjing Xia , Wuyi Ye","doi":"10.1016/j.jempfin.2026.101693","DOIUrl":"10.1016/j.jempfin.2026.101693","url":null,"abstract":"<div><div>This study introduces a method for computing daily systemic risk measures using high-frequency data, specifically realized conditional value-at-risk (RCoVaR) and realized marginal expected shortfall (RMES). RCoVaR and RMES are empirical estimators derived from scaling high-frequency returns, offering benefits such as model-independence and adaptability to diverse datasets. To mitigate market microstructure noise (MMN) inherent in high-frequency data, we employ overlapping and subsampling approaches in the estimation of RCoVaR and RMES. Empirical analysis focuses on systemic risk within the foreign exchange market. The results indicate that noise-treated RCoVaR and RMES serve as effective alternatives for daily systemic risk estimation. These techniques also enhance out-of-sample predictive accuracy when employed as predictors within systemic risk forecasting frameworks.</div></div>","PeriodicalId":15704,"journal":{"name":"Journal of Empirical Finance","volume":"87 ","pages":"Article 101693"},"PeriodicalIF":2.4,"publicationDate":"2026-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"146192398","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-04-01Epub Date: 2026-03-23DOI: 10.1016/j.jempfin.2026.101713
Paula Hill , Adriana Korczak , Shuo Wang
We show that insider trading behaviour provides a credible signal of future share return performance within a sample of firms undergoing financial distress. We argue that when firms are in distress the incentive for insiders to employ their trading to send a false positive signal is high, however we find that distressed firms with insider buying have significantly better future share returns than firms with no insider trading or insider selling. We employ credit rating downgrades as confirmation of the distressed state, and we investigate the reasons why the positive signal associated with insider buying deviates from the negative downgrade signal of the rating agencies. Our analysis shows that this is not due to a lack of rating agency information; there are very few rating downgrade reversals. We conclude that insider purchases are partly driven by an over-reaction to bad news in the period of distress, which subsequently reverses; such mispricing would not be expected to be related to informed credit rating actions. We also find that the share return recovery is partial, and this leaves open the possibility that it is inadequate to reach the rating upgrade hurdle. While on average outside investors would benefit from retaining their shares in distressed firms with insider buying, we highlight a subset of firms where this is not the case.
{"title":"The veracity of insider trading signals in financially distressed firms","authors":"Paula Hill , Adriana Korczak , Shuo Wang","doi":"10.1016/j.jempfin.2026.101713","DOIUrl":"10.1016/j.jempfin.2026.101713","url":null,"abstract":"<div><div>We show that insider trading behaviour provides a credible signal of future share return performance within a sample of firms undergoing financial distress. We argue that when firms are in distress the incentive for insiders to employ their trading to send a false positive signal is high, however we find that distressed firms with insider buying have significantly better future share returns than firms with no insider trading or insider selling. We employ credit rating downgrades as confirmation of the distressed state, and we investigate the reasons why the positive signal associated with insider buying deviates from the negative downgrade signal of the rating agencies. Our analysis shows that this is not due to a lack of rating agency information; there are very few rating downgrade reversals. We conclude that insider purchases are partly driven by an over-reaction to bad news in the period of distress, which subsequently reverses; such mispricing would not be expected to be related to informed credit rating actions. We also find that the share return recovery is partial, and this leaves open the possibility that it is inadequate to reach the rating upgrade hurdle. While on average outside investors would benefit from retaining their shares in distressed firms with insider buying, we highlight a subset of firms where this is not the case.</div></div>","PeriodicalId":15704,"journal":{"name":"Journal of Empirical Finance","volume":"86 ","pages":"Article 101713"},"PeriodicalIF":2.4,"publicationDate":"2026-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"147800778","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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