We investigate whether prospect theory preferences can predict a disposition effect. We consider two implementations of prospect theory: in one case, preferences are defined over "annual" gains and losses; in the other, they are defined over "realized" gains and losses. Surprisingly, the annual...

We model the relationship between asset float (tradeable shares) and speculative bubbles. Investors with heterogeneous beliefs and short-sales constraints trade a stock with limited float because of insider lockups. A bubble arises as price overweighs optimists' beliefs and investors anticipate...