Skip Navigation


RFS Advance Access originally published online on May 25, 2005
Review of Financial Studies 2005 18(3):981-1020; doi:10.1093/rfs/hhi023
This Article
Right arrow Full Text
Right arrow Full Text (PDF)
Right arrow All Versions of this Article:
18/3/981    most recent
hhi023v1
Right arrow Alert me when this article is cited
Right arrow Alert me if a correction is posted
Services
Right arrow Email this article to a friend
Right arrow Similar articles in this journal
Right arrow Similar articles in ISI Web of Science
Right arrow Alert me to new issues of the journal
Right arrow Add to My Personal Archive
Right arrow Download to citation manager
Right arrow Search for citing articles in:
ISI Web of Science (7)
Right arrowRequest Permissions
Google Scholar
Right arrow Articles by Hou, K.
Right arrow Articles by Moskowitz, T. J.
Right arrow Search for Related Content
Related Collections
Right arrow G11 - Portfolio Choice; Investment Decisions
Right arrow G12 - Asset Pricing; Trading volume; Bond Interest Rates
Right arrow G14 - Information and Market Efficiency; Event Studies
Right arrow L25 - Firm Performance: Size, Diversification, and Scope
Social Bookmarking
Add to CiteULike   Add to Connotea   Add to Del.icio.us  
What's this?

© The Author 2005. Published by Oxford University Press. All rights reserved. For Permissions, please email: journals.permissions@oupjournals.org

Market Frictions, Price Delay, and the Cross-Section of Expected Returns

Kewei Hou
Fisher College of Business, The Ohio State University

Tobias J. Moskowitz
Graduate School of Business, University of Chicago, and NBER

Address correspondence to Kewei Hou, Fisher College of Business, The Ohio State University, 2100 Neil Ave., Columbus, OH 43210, or e-mail: hou.28{at}osu.edu.

We parsimoniously characterize the severity of market frictions affecting a stock using the delay with which its price responds to information. The most delayed firms command a large return premium not explained by size, liquidity, or microstructure effects. Moreover, delay captures part of the size effect, idiosyncratic risk is priced only among the most delayed firms, and earnings drift is monotonically increasing in delay. Frictions associated with investor recognition appear most responsible for the delay effect. The very small segment of delayed firms, comprising only 0.02% of the market, generates substantial variation in average returns, highlighting the importance of frictions.


Add to CiteULike CiteULike   Add to Connotea Connotea   Add to Del.icio.us Del.icio.us    What's this?


This article has been cited by other articles:


Home page
 REV FINANC STUDHome page
K. Hou
Industry Information Diffusion and the Lead-lag Effect in Stock Returns
Rev. Financ. Stud., July 1, 2007; 20(4): 1113 - 1138.
[Abstract] [Full Text] [PDF]

Home page
 REV FINANC STUDHome page
J. M. Griffin, F. Nardari, and R. M. Stulz
Do Investors Trade More When Stocks Have Performed Well? Evidence from 46 Countries
Rev. Financ. Stud., May 1, 2007; 20(3): 905 - 951.
[Abstract] [Full Text] [PDF]


Disclaimer: Please note that abstracts for content published before 1996 were created through digital scanning and may therefore not exactly replicate the text of the original print issues. All efforts have been made to ensure accuracy, but the Publisher will not be held responsible for any remaining inaccuracies. If you require any further clarification, please contact our Customer Services Department.