We report evidence that salience may have economically significant effects on homeowners' borrowing behavior, through a bias in favour of less salient but more costly loans. We outline a simple model in which some consumers are biased. Under plausible assumptions, the bias may affect prices in...

We argue that many firms become publicly traded on a stock exchange as the first stage of a longer term divestment plan. Making a direct sale of unlisted stock may be associated with great adverse selection costs. The publicly listed stock price reduces adverse selection by aggregating the...

This paper uses daily capital flows to the Swedish bond market to analyse the relative information endowment of domestic and foreign investors. Using the standard framework of a noisy rational expectations equilibrium it is shown that foreign investors are, on average, better informed than...

This paper provides an extensive empirical investigation into the sources of index return autocorrelation, focusing on the relation between autocorrelation in individual stock returns and autocorrelation in index returns. The study uses daily data from the Stockholm Stock Exchange over the...

This paper investigates the properties of the Damodaran (Journal of Finance, 1993) estimator of price adjustment. It is concluded that strong bias and low precision of the Damodaran estimator renders it useless for empirical work, even when the available sample size is very large. As an...

The purpose of this paper is to provide an explanation for relative pricing of futures contracts with respect to underlying stocks based on short sales constraints and informational lags between the two markets. In this model stocks and futures are perfect substitutes, except that short sales...

This paper explores the profitability of portfolio-based momentum strategies. The data consists of all NYSE, AMEX, and NASDAQ stocks on the CRSP database. The analysis considers the period July 1963 to December 2002 and the tests are performed on portfolios formed on industry, size and...

We construct a parsimonious model of a financial market where the marginal investor is an endogenous noise trader. Such a trader anticipates that future shocks may force him to exit his position. In compensation he requires a higher return. We show that the original seller of the asset pays the...

This paper introduces and analyses a model of cross-security information aggregation in a rational expectations equilibrium (REE). The model predicts a well-defined lead-lag structure between securities returns as a result of Bayesian information extraction from realised securities prices. Both...

In theory, prices of current-month federal funds futures contracts should reflect market expectations of near-term movements in the Federal Reserve's target level for the federal funds rate. However, empirical results show that such measures of market expectations are too noisy to predict...