This article examines an equity pairs trading strategy using daily, weekly and monthly European share price data over the period 1998–2007. The authors shows that when stocks are matched into pairs with minimum distance between normalised historical prices, a simple trading rule based on...

While informal debt is often used as a funding source for retail investors, very little is known about the characteristics of its sources and use. This is particularly true in emerging markets where the use of informal debt is widespread. We examine the determinants of the use of informal debt...

Is real investment fully determined by fundamentals or is it sometimes affected by stock market misvaluation? We introduce three new tests that: measure the reaction of investment to sales shocks for firms that may be overvalued; use Fama-MacBeth regressions to determine whether overinvestment...

In this paper, a model of bounded rational investors investing their portfolio in a passive investment vehicle (e.g., an Exchange Traded Fund replicating a broad index) or an actively managed fund is presented. The model proposes that the quick reswitching of these short-term oriented investors...

Diese Untersuchung verfolgt mehrere Ziele. Es soll ein Beitrag geleistet werden zur Klärung folgender Fragen: Welches sind die konstituierenden Merkmale von Preisblasen? Läßt sich die Existenz von Preisblasen empirisch nachweisen? Lassen sich Preisblasen von anderen typischen Phasen der...

We investigate the effect of the tone of news on investor stock price expectations and beliefs. In an experimental study we ask subjects to estimate a future stock price for twelve real listed companies. As additional information we provide them with historical stock prices and extracts from...

We analyse a long panel of households' stock market beliefs to gain insights into the nature of their expectations formation processes. We classify respondents into one of five groups based on their data and estimate group-wise models of expectations formation. Two of the groups are at opposite...

An efficient market should not show any anomalies. When new information reaches a market which is efficient, it should automatically translate into prices of assets, which ought to eliminate the possibility of gaining an advantage over other investors, thus preventing excess profits. However,...