Investor Inattention, Firm Reaction, and Friday Earnings Announcements

Do firms release news strategically in response to investor inattention? We consider news about earnings and analyze the response of returns to announcements on Friday and other weekdays. Friday announcements have less immediate and more delayed stock return response. The delayed response as a percentage of the total response is 60 percent on Friday and 40 percent on other weekdays. In addition, abnormal trading volume around announcement day is 10 percent lower for Friday announcements. These findings suggest that weekends distract investor attention temporarily. They support explanations of post-earning announcement drift based on underreaction to information caused by limited attention. We also document that firms release worse announcements on Friday. Friday announcements are associated with a 45 percent higher probability of a negative earnings surprise and a 50 basis points lower abnormal return. The firm-based evidence of strategic news release corroborates the investor-based evidence of inattention on Friday. The results for stock returns, volume, and strategic behavior support the hypothesis of limited attention.

Risk and expected returns of private equity investments : evidence based on market prices

We estimate the risk and expected returns of private equity investments based on the market prices of exchange traded funds of funds that invest in unlisted private equity funds. Our results indicate that the market expects unlisted private equity funds to earn abnormal returns of about one to two percent. We also find that the market expects listed private equity funds to earn zero to marginally negative abnormal returns net of fees. Both listed and unlisted private equity funds have market betas close to one and positive factor loadings on the Fama-French SMB factor. Private equity fund returns are positively correlated with GDP growth and negatively correlated with the credit spread. Finally, we find that market returns of exchange traded funds of funds and listed private equity funds predict changes in self-reported book values of unlisted private equity funds

Attention, Demographics, and the Stock Market

Do investors pay enough attention to long-term fundamentals? We consider the case of demographic information. Cohort size fluctuations produce forecastable demand changes for age-sensitive sectors, such as toys, bicycles, beer, life insurance, and nursing homes. These demand changes are predictable once a specific cohort is born. We use lagged consumption and demographic data to forecast future consumption demand growth induced by changes in age structure. We find that demand forecasts predict profitability by industry. Moreover, forecasted demand changes 5 to 10 years in the future predict annual industry returns. One additional percentage point of annualized demand growth due to demographics predicts a 5 to 10 percentage point increase in annual abnormal industry stock returns. However, forecasted demand changes over shorter horizons do not predict stock returns. The predictability results are more substantial for industries with higher barriers to entry and with more pronounced age patterns in consumption. A trading strategy exploiting demographic information earns an annualized risk-adjusted return of 5 to 7 percent. We present a model of underreaction to information about the distant future that is consistent with the findings.

Capital Budgeting vs. Market Timing: An Evaluation Using Demographics

An ongoing debate sets capital budgeting against market timing. The primary difficulty in evaluating these theories is finding distinct exogenous proxies for investment opportunities and mispricing. We use demand shifts induced by demographics to address this problem, and hence, provide a more definitive analysis of the theories. According to capital budgeting, industries anticipating positive demand shifts in the near future should issue more equity (and debt) to finance additional capacity. To the extent that demographic shifts in the more distant future are not incorporated into equity prices, market timing implies that industries anticipating positive demand shifts in the distant future should issue less equity due to undervaluation. We find evidence supporting both capital budgeting and market timing: new listings and equity issuance by existing listings respond positively to demand shifts up to 5 years ahead, and negatively to demand shifts 5 to 10 years ahead.

Risk and Expected Returns of Private Equity Investments: Evidence Based on Market Prices

We estimate the risk and expected returns of private equity investments based on the market prices of exchange-traded funds of funds that invest in unlisted private equity funds. Our results indicate that the market expects unlisted private equity funds to earn abnormal returns of approximately 1% per year. We also find that the market expects listed private equity funds to earn zero or marginally negative abnormal returns net of fees. Both listed and unlisted private equity funds have market betas close to one and positive factor loadings on the Fama-French SMB factor. Private equity fund returns are positively related to GDP growth and negatively related to the credit spread. In addition, we find that market returns of exchange traded funds of funds and listed private equity funds predict changes in self-reported book values of unlisted private equity funds.

Processing of Nonconjugative Resistance Plasmids by Conjugation Nicking Enzyme of Staphylococci

ABSTRACT Antimicrobial resistance in Staphylococcus aureus presents an increasing threat to human health. This resistance is often encoded on mobile plasmids, such as pSK41; however, the mechanism of transfer of these plasmids is not well understood. In this study, we first examine key protein-DNA interactions formed by the relaxase enzyme, NES, which initiates and terminates the transfer of the multidrug resistance plasmid pSK41. Two loops on the NES protein, hairpin loops 1 and 2, form extensive contacts with the DNA hairpin formed at the oriT region of pSK41, and here we establish that these contacts are essential for proper DNA cleavage and religation by the full 665-residue NES protein in vitro . Second, pSK156 and pCA347 are nonconjugative Staphylococcus aureus plasmids that contain sequences similar to the oriT region of pSK41 but differ in the sequence predicted to form a DNA hairpin. We show that pSK41-encoded NES is able to bind, cleave, and religate the oriT sequences of these nonconjugative plasmids in vitro . Although pSK41 could mobilize a coresident plasmid harboring its cognate oriT , it was unable to mobilize plasmids containing the pSK156 and pCA347 variant oriT mimics, suggesting that an accessory protein like that previously shown to confer specificity in the pWBG749 system may also be involved in transmission of plasmids containing a pSK41-like oriT . These data indicate that the conjugative relaxase in trans mechanism recently described for the pWBG749 family of plasmids also applies to the pSK41 family of plasmids, further heightening the potential significance of this mechanism in the horizontal transfer of staphylococcal plasmids. IMPORTANCE Understanding the mechanism of antimicrobial resistance transfer in bacteria such as Staphylococcus aureus is an important step toward potentially slowing the spread of antimicrobial-resistant infections. This work establishes protein-DNA interactions essential for the transfer of the Staphylococcus aureus multiresistance plasmid pSK41 by its relaxase, NES. This enzyme also processed variant oriT -like sequences found on numerous plasmids previously considered nontransmissible, suggesting that in conjunction with an uncharacterized accessory protein, these plasmids may be transferred horizontally via a relaxase in trans mechanism. These findings have important implications for our understanding of staphylococcal resistance plasmid evolution