Past literature suggests that success rates in professional basketball are independent of past performance and this has been interpreted as evidence that the commonly shared belief in Hot Hands (<italic>HH</italic>) is a cognitive illusion. This is often cited as evidence of biased decision making, even when...

This paper estimates volatility changes in daily returns to the Dow Jones Industrial Average over the sample period 1897 through 1988. This allow a direct investigation of the reaction of the level of stock prices and subsequent expected returns to these estimated changes in volatility. The...