We study the interplay of share prices and firm decisions when share prices aggregate and convey noisy information about fundamentals to investors and managers. First, we show that the informational feedback between the firm's share price and its investment decisions leads to a systematic...

We propose a dynamic heterogeneous agents model which generates testable hypotheses about the formation, timing and bursting of asset price bubbles in the presence of short-sale constraints, given a calibration that is consistent with momentum and reversal effects for unconstrained assets....

We investigate in a theoretical framework the joint role played by investors' attention to news and learning uncertainty in determining asset prices. The model provides two main predictions. First, stock return variance and risk premia increase with both attention and uncertainty. Second, this...

Short-sale constrained past-winners and losers both underperform strongly in the first year post-formation, earning market-adjusted returns of −13%, and −17%, respectively. However, constrained winners continue to underperform for the following four years, earning a cumulative...

We study the impact of model disagreement on the dynamics of asset prices, return volatility, and trade in the market. In our continuous-time framework, two investors have homogeneous preferences and equal access to information, but disagree about the length of the business cycle. We show that...