An informational cascade occurs when it is optimal for an individual, having observed the actions of those ahead of him, to follow the behavior of the preceding individual without regard to his own information. We argue that localized conformity of behavior and the fragility of mass behaviors can be explained by informational cascades.

https://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1405027_code2024.pdf?abstractid=1286306&mirid=1&type=2

A Theory of Fads, Fashion, Custom, and Cultural Change as Informational Cascades

/pdf/a-theory-of-fads-fashion-custom-and-cultural-change-as-3s4j8rv8xm.pdf

Companies are increasingly asked to provide innovative solutions to deep-seated problems of human misery, even as economic theory instructs managers to focus on maximizing their shareholders' wealt

Misery Loves Companies: Rethinking Social Initiatives by Business:

This paper studies the cross-sectional properties of return forecasts derived from Fama-MacBeth regressions. These forecasts mimic how an investor could, in real time, combine many firm characteristics to obtain a composite estimate of a stockâs expected return. Empirically, the forecasts vary substantially across stocks and have strong predictive power for actual returns. For example, using ten-year rolling estimates of Fama- MacBeth slopes and a cross-sectional model with 15 firm characteristics (all based on low-frequency data), the expected-return estimates have a cross-sectional standard deviation of 0.87% monthly and a predictive slope for future monthly returns of 0.74, with a standard error of 0.07.

/pdf/the-cross-section-of-expected-stock-returns-3oji85htnb.pdf

The Cross-section of Expected Stock Returns

https://faculty.fuqua.duke.edu/~charvey/Research/Working_Papers/W73_The_economic_implications.pdf

The economic implications of corporate financial reporting

Our article comprehensively reexamines the performance of variables that have been suggested by the academic literature to be good predictors of the equity premium. We find that by and large, these models have predicted poorly both in-sample (IS) and out-of-sample (OOS) for 30 years now; these models seem unstable, as diagnosed by their out-of-sample predictions and other statistics; and these models would not have helped an investor with access only to available information to profitably time the market.

/pdf/a-comprehensive-look-at-the-empirical-performance-of-equity-a8mudsid3i.pdf

A Comprehensive Look at the Empirical Performance of Equity Premium Prediction

Issuers of initial public offerings ~IPOs! can report earnings in excess of cash f lows by taking positive accruals. This paper provides evidence that issuers with unusually high accruals in the IPO year experience poor stock return performance in the three years thereafter. IPO issuers in the most “aggressive” quartile of earnings managers have a three-year aftermarket stock return of approximately 20 percent less than IPO issuers in the most “conservative” quartile. They also issue about 20 percent fewer seasoned equity offerings. These differences are statistically and economically significant in a variety of specifications.

/pdf/earnings-management-and-the-long-run-market-performance-of-2aofbwnnaq.pdf

Earnings Management and the Long‐Run Market Performance of Initial Public Offerings

https://www.ivo-welch.info/research/journalcopy/1998-jfe.pdf

Ivo Welch

Papers

A Theory of Fads, Fashion, Custom, and Cultural Change as Informational Cascades

A Theory of Fads, Fashion, Custom, and Cultural Change as Informational Cascades

A Comprehensive Look at the Empirical Performance of Equity Premium Prediction

Earnings Management and the Long‐Run Market Performance of Initial Public Offerings

Earnings management and the underperformance of seasoned equity offerings