We examine whether consumer confidence - as a proxy for individual investor sentiment - affects expected stock returns internationally in 18 industrialized countries. In line with recent evidence for the U.S., we find that sentiment negatively forecasts aggregate stock market returns on average...

Using a new data set on investor sentiment we show that institutional and individual sentiment proxy for smart money and noise trader risk, respectively. First, using bias-adjusted long-horizon regressions, we document that institutional sentiment forecasts stock market returns at intermediate...

This study shows that order flow in a foreign exchange market only has permanent price impact if it comes from certain regions. These regions are as predicted by the local information hypothesis centers of political and financial decision making. It is revealing that orders from other regions...

The puzzling evidence of seemingly high momentum returns is related to an understanding of risk as a simple covariance. If we consider, however, risk in higher-order statistical moments, momentum returns appear less advantageous. Thus, a prospect-theoretical assessment of US stock momentum...

This paper contributes empirically to our understanding of informed traders. It analyzes traders’ characteristics in an electronic limit order market via anonymous trader identities. We use six indicators of informed trading in a cross-sectional multivariate approach to identify traders with...

Existing empirical evidence is inconclusive on whether professional investors show sophisticated behavior or not, a question which is at the heart of market efficiency. This ambiguous evidence is mostly based on trading data or laboratory evidence, which each has its limitations. We complement...

This paper shows how traders learn from post-trade identity disclosure in a currency limit order market. We establish that identity disclosure reveals information and show how traders react by reversing their order flow in line with the better informed. Informed traders primarily incorporate...