Economists have long recognized the importance of information veracity in valuing risky securities. Market participants concerned about the credibility of information measures may require additional compensation to entice them to hold stocks with less transparent information. These same...

In this research we performed pairs trading strategy based on a comparative mean reversion of asset prices with daily data over the period 2002 through 2008 in Istanbul Stock Exchange. We did not categorize stock pairs by sectors and therefore it is possible to observe mean reversion...

In this paper we study whether the commodity futures market predicts the commodity spot market. Using historical daily data on four commodities—oil, gold, platinum, and silver—we find that they do. We then show how investors can use this information on the futures market to devise trading...

This study examines the usefulness of trader-position-based sentiment index for forecasting future prices in six major agricultural futures markets. It has been found that large speculator sentiment forecasts price continuations. In contrast, large hedger sentiment predicts price reversals....

This study examines the influence of investor sentiment on the relationship between disagreement among investors and future stock market returns. We find that the relationship between disagreement and future stock market returns time-varies with the degree of investor sentiment. Higher...

This paper develops two competing hypotheses for the relation between the cross-sectional standard deviation of logarithmic firm fundamental-to-price ratios (``dispersion'') and expected aggregate returns. In models with fully rational beliefs, greater dispersion indicates greater risk and...

This study explores the effect of investor sentiment on the volatility forecasting power of option-implied information. We find that the risk-neutral skewness has the explanatory power regarding future volatility only during high sentiment periods. Furthermore, the implied volatility has varying...

Behavioral theories predict that firm valuation dispersion in the cross-section (“dispersion”) measures aggregate overpricing caused by investor overconfidence and should be negatively related to expected aggregate returns. This paper develops and tests these hypotheses. Consistent with the...

Bali et al. (2011) uncover a new anomaly (the “MAX effect”) related to investors’ desire for stocks with lottery-like payoffs. Specifically, stocks with high maximum daily returns (high MAX) over the past month perform poorly relative to stocks with low maximum daily returns (low MAX) over...

We test whether asymmetric preferences for losses versus gains as in Ang, Chen, and Xing (2006) also affect the pricing of cash flow versus discount rate news as in Campbell and Vuolteenaho (2004). We construct a new four-fold beta decomposition, distinguishing cash flow and discount rate betas...