What happens in Vegas stays in Vegas? Firsthand experience and EDGAR search activity in Las Vegas casino hotels

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Abstract

What role does investors’ firsthand experience have in stock selection, and does this firsthand experience lead to better investment outcomes? Using a unique data set containing the stock research activities of patrons of Las Vegas casino hotels, we find evidence that investors’ firsthand experience motivates interest in Vegas-related travel industry stocks. Additionally, their interest in these stocks predicts strong performance; Vegas interest leads to positive abnormal returns of up to 3.7% (0.4%) over the following year (month), and abnormal returns are highest in industries that are related to Las Vegas.

Tick size and price efficiency: Further evidence from the Tick Size Pilot Program

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Abstract

This paper examines whether larger tick sizes improve or hinder price efficiency for small-capitalization stocks using data from implementing and terminating the Tick Size Pilot Program (TSPP). We show that the TSPP led to increases in various liquidity measures, and its termination restored them to their pre-TSPP levels. We also find evidence that the TSPP led to trader migration from the pilot to control stocks. The TSPP implementation (termination) is associated with decreases (increases) in price efficiency, indicating that price efficiency decreases with tick sizes. Liquidity and informed trading are two channels through which the TSPP changes price efficiency.

The consequences of non‐trading institutional investors

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Abstract

We document that institutional investors do not trade a single share, on average, in one of five stocks in their portfolio for an extended period. Investors with high inaction are likely to underperform in the future. Our results show a similar underperformance for stocks with a high non-trading level of institutional investors. We investigate several behavioral biases as potential drivers of the non-trades and find no evidence of distraction, overconfidence, and disposition effects. Institutional investors’ tendency to sell stocks with salient price movements and recency bias best explains their inactions. Overall, the non-trading behavior of institutional investors serves as a unique predictor for their future performance and potential behavioral biases are driving this predictability.

Estimating contagion mechanism in global equity market with time‐zone effect

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Abstract

This paper proposes a time-zone vector autoregressive (VAR) model to investigate comovements in the global financial market. Analyzing daily data from 36 national equity markets, we explore the subprime and European debt crises using static analysis and the COVID-19 crisis through a rolling window method. Our study of comovements using VAR coefficients reveals a resonance effect in the global system. Findings on densities and assortativities suggest the existence of the transmission mechanism in all periods and abnormal structural changes during the crises. Strength analysis uncovers the information transmission mechanism across continents over normal and turmoil periods and emphasizes specific stock markets' unique roles. We examine dynamic continent strengths to demonstrate the contagion mechanism in the global equity market over an extended period. Incorporating the time-zone effect significantly enhances the VAR model's interpretability. Signed networks provide more information on global equity markets and better identify critical contagion patterns than unsigned networks.