This study clears up misunderstandings regarding the diversification of unsystematic risk. Contrary to conventional wisdom, there is no evidence investors can, or have ever been able to, easily form portfolios containing negligible exposure to unsystematic returns. Because well-diversified...

Firm-specific risk climbed steadily between 1962 and 1999, but fell sharply between 2000 and 2003. We hypothesize that changes in the composition of the market, rather than fundamental changes in the economy or return-generating process, drive these changes in aggregate firm-specific risk over...

This study presents the results of the first direct empirical tests of the De Long, Schleifer, Summers, and Waldmann noise trader model. The two key propositions of the model are that: (1) noise trader risk is systematic and (2) it is priced in the market. The results presented in this paper do...

The success of momentum strategies over the past 20 years is predominately driven by the last month in each quarter. Excluding Januaries (a month in which lag losers typically outperform lag winners), the average monthly return to a momentum strategy in non-quarter-ending months is 59 basis...

A number of recent studies test whether institutional investors, as a group, engage in momentum trading. Given directly observable returns and changes in institutional ownership, it is surprising that these studies reach vastly different conclusions. I re-examine the relation between changes in...

Institutional investors' demand for a security this quarter is positively correlated with their demand for the security last quarter. These results are attributed to institutional investors following each other into and out of the same securities (quot;herdingquot;)and institutional investors...

Recent studies document a strong positive relation between quarterly and annual changes in institutional ownership and returns measured over the same period. The source of this positive correlation could arise from institutional investors' intra-period positive feedback trading, institutions...

We use debt crowdfunding data to examine how borrowers' writing style is associated with lender and borrower behavior. Controlling for credit and auction characteristics, lenders bid more aggressively, are more likely to fund, and charge lower rates to borrowers whose writing is more readable,...

Recent models and the popular press suggest that large groups of hedge funds follow similar strategies resulting in crowded equity positions that destabilize markets. Inconsistent with this assertion, we find that hedge fund equity portfolios are remarkably independent. Moreover, when hedge...

We hypothesize that greater economic policy uncertainty (EPU) leads to increases in unhealthy behaviors by lowering individuals' impulse control. Based on 6.1 million interviews over 22 years, our analysis reveals a positive relation between EPU and the propensity to make poor lifestyle choices...