The weak unconditional risk-adjusted performance of Canadian equity mutual funds becomes positive and significant with conditioning of nonlinear (including higher-order moment) kernel-based benchmarks. A restriction on the mean of the asset-pricing kernel not only affects the performance statistics and inferences but also reverses and mitigates the conditioning information-based effect that causes larger funds to outperform smaller funds. Findings on the relationship between fund performance and fund characteristics suggest that risk-adjusted performance is related to the age and size of the fund and to a lesser extent to the fund load structure but is unrelated to management fees.

We examine whether institutional investors, and specifically underwriters, have an “edge” over other market participants in new public companies. We find evidence that underwriters retain an information advantage in the firms they take public and that they capitalize on this information by selling firms that are later sued in class action litigation. In addition, while ownership data suggests that institutions are “smarter” than individuals, underwriters are even more proactive in their trading than other institutional investors. An informed pre-litigation selling is accompanied by an increased divergence of opinion about the sued firm.

Microstructure effects of tender offer acquisitions on targets and acquirers differentiated by listing venue and payment method are examined. Trading activity increases more for targets than for acquirers upon offer announcement. Investors are more likely to sell targets upon announcement using direct market orders against ask limit orders for cash payment offers. While target liquidity improves as spread costs fall and quoted depths increase, acquirer liquidity falls continuously to successful offer completion. Due to increased trading differences, temporary trade costs fall more for targets than for acquirers. Permanent trade costs decline over the tender offer cycle for both parties, and especially for targets for cash tender offers and for acquirers for share tender offers. The probability of informed trading declines (remains constant) for targets (acquirers) because increased trading intensity is greater (the same) for uninformed versus informed traders. As expected, abnormal returns and information surprise are negatively (but weakly) related upon announcement.

This paper develops a theoretical coherent model related to fundamentals that explains observed behaviour of stock market returns, including shape of distribution, serial correlation, and market fluctuations. The model, a quantum model, includes a series of distributions extending from the lowest order normal distribution to higher order distributions in a fully natural and predictable way. A Taylor series approximation is used in the neighbourhood of a stable equilibrium point of returns to successfully fit the model to fourth order. A time evolution of the distribution of returns is developed to explain market fluctuations. One result is a plausible explanation why daily returns differ from monthly returns. A measure of market inertia is given. Keywords: stock market returns, market fluctuations, heavy tails, mixing of distributions, quantum model, 'measurement difficulty parameter'