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PurposeResearch draws the distinction between noise traders and informed traders. Research also documents market biases in equity returns due to cloud cover, a non‐informational (noise) event, showing that returns decrease on cloudy days. The purpose of this paper is to investigate the trading behaviour of short‐sellers, who are considered informed traders, conditioning on the level of cloudiness, and find an increase in short selling with the level of cloudiness. Additionally, the paper finds decreases in short selling the three days prior to a cloudy day (or series of cloudy days).Design/methodology/approachThe authors replicate the weather anomaly in stock returns reported in the literature for the sample period, and then study the trading behaviour of short sellers conditioned on cloud cover. Additionally the authors treat cloud cover as an event and study short selling volume in the pre‐event window.FindingsThe paper finds an increase in short selling with the level of cloudiness. Additionally, the paper finds decreases in short selling, relative to the event day(s), in the three days prior to a cloudy day (or series of cloudy days).Originality/valueThe authors believe that they are the first to document that weather impacts short seller's trading behaviour. The authors argue that the results point towards a behavioural bias.

We examine the impact of Ebola headline news days on media-highlightedstocks. An Ebola news day (negative or positive in nature) is associated with increasedtrading, higher share volume, higher dollar volume, and increased share turnover.OLS regressions on industry-specific portfolios reveal that airline, restaurant, andcruise ship returns reverse themselves one day after the Ebola news event, a resultthat is consistent with behavioral overreaction literature. Empirical findings could beused to prepare market participants for analogous epidemics.

Business practice and prior research in capital budgeting both establish that a firm's marginal cost of capital (MCC) is not constant across the scope of its investments. Capital budgeting decision methodology in textbooks and in practice, however, does not address the full implications of capital budgeting decisions made under a non-constant MCC paradigm. An endogeneity problem arises naturally due to the presence of a non-constant MCC. In order to value a project, it is necessary to determine the appropriate cost of capital. However, in order to determine the appropriate cost of capital, a project must be ranked in order to determine where the project is found on the MCC schedule. We establish a net present value (NPV) maximizing methodology that fully resolves this problem. We demonstrate, using a Monte Carlo simulation, the potential magnitude of investment errors and the extent of shareholder wealth destruction that occurs when commonly used methods or simplifying assumptions are employed in place of using this optimizing approach.

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