We propose a statistical model of differences in beliefs in which heterogeneous investors are represented as different machine learning model specifications. Each investor forms return forecasts from their own specific model using data inputs that are available to all investors. We measure...

We examine how institutional investors trade stocks with high research and development (R&D) expenses and investigate whether they can detect value-relevant R&D. We document significant differences between hedge funds and other institutional investors in terms of their trading in high R&D...

This paper explores the role mutual fund herding plays on the return comovement in Chinese stocks. The results show that mutual fund herding significantly reduces the return comovement among Chinese stocks, providing evidence for the existence of a rational herding behavior by mutual funds. We...

We test the hypothesis that retail investors' attraction to lottery stocks induces overvaluation, and is amplified by high attention and social interactions. The lottery premium (negative abnormal returns) is stronger for high-retail-ownership stocks—especially those that also have high...

Understanding fundamental human tendencies can help financial planners and advisers recognize behaviors that may interfere with clients achieving their long-term goals. The authors describe several well-established behavioral biases and suggest how to overcome them

“Financial Behavior: An Overview” is the introduction chapter for the book Financial Behavior: Players, Services, Products, and Markets edited by H. Kent Baker, Greg Filbeck, and Victor Ricciardi. The book provides a synthesis of the theoretical and empirical literature on the financial...

This paper investigates hedge fund herding at the industry level and its impact on industry returns. Although the level of industry herding on average is substantially weaker for hedge funds compared to non-hedge fund institutions, we find that industries that experience heavy herding by hedge...

We propose a statistical model of differences in beliefs in which heterogeneous investors are represented as different machine learning model specifications. Each investor forms return forecasts from their own specific model using data inputs that are available to all investors. We measure...

“Investor Behavior: An Overview” is the introduction chapter for the book Investor Behavior: The Psychology of Financial Planning and Investing edited by H. Kent Baker and Victor Ricciardi that presents a historical perspective of investor psychology and theory. The field of investor...

We find that strong disagreements between hedge funds and other institutions in their common stock trades are twice as likely as agreements. The overall success of hedge funds’ trades is confined to disagreement stocks. While hedge funds are on average positive feedback traders, albeit weaker...