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1577 volatile are also considered, but only briefly, under the rubric of return predictability For the second and third categories, i propose changes in title, not cover age. Instead of semi-strong-form tests of the adjustment of prices to public announcements, I use the now common title, event studies. Instead of strong. form tests of whether specific investors have information not in market prices, I suggest the more descriptive title, tests for private information Return predictability is considered first, and in the most detail. The detail reflects my interest and the fact that the implications of the evidence on the predictability of returns through time are the most controversial. In brief, the new work says that returns are predictable from past returns, dividend yields, and various term-structure variables. The new tests thus reject the old market efficiency-constant expected returns model that seemed to do well in the early work. This means, however, that the new results run head-on into che joint-hypothesis problem: Does return predictability reflect rational vari ation through time in expected returns, irrational deviations of price from fundamental value, or some combination of the two? We should also acknowl edge that the apparent predictability of returns may be spurious, the result of data-dredging and chance sample-specific condition The evidence discussed below, that the variation through time in expected returns is common to corporate bonds and stocks and is related in plausible ways to business conditions, leans me toward the conclusion that it is real and rational. Rationality is not established by the existing tests, however, and the joint-hypothesis problem likely means that it cannot be established Still, even if we disagree on the market efficiency implications of the new results on return predictability, I think we can agree that the tests enrich our knowledge of the behavior of returns, across securities and through time Event studies are discussed next, but briefly. Detailed reviews of event studies are already available, and the implications of this research for market efficiency are less controversial. Event studies have, however, been a growth industry during the last 20 years. Moreover I argue that, because they come closest to allowing a break between market efficiency and equilib rium-pricing issues, event studies give the most direct evidence on efficiency And the evidence is mostly supportive Finally, tests for private information are reviewed. The new results clarify earlier evidence that corporate insiders have private information that is not fully reflected in prices. The new evidence on whether professional inves ment managers(mutual fund and pension fund) have private information is, however, murky, clouded by the joint-hypothesis problem III. Return Predictability: Time-Varying Expected Returns through time. Unlike the pre- 1970 work, which focused on forecasting re turns from past returns, recent tests also consider the forecast power of
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