We match administrative panel data on portfolio choices with survey measures of financial literacy. We observe that, controlling for portfolio risk, most literate households experience 0.4% higher annual returns than least literate households. We then show that more literate households display...

We study banks' incentive to pool assets of heterogeneous quality when investors evaluate pools by extrapolating from limited sampling. Pooling assets of heterogeneous quality induces dispersion in investors' valuations without affecting their average. Prices are determined by market clearing...

We model a financial market in which companies engage in strategic financial reporting knowing that investors only pay attention to a randomly drawn sample from firms' reports and extrapolate from this sample. We investigate the extent to which stock prices differ from the fundamental values,...

We match administrative panel data on portfolio choices with survey data on preferences over ambiguity. We show that ambiguity averse investors bear more risk, due to a lack of diversification. In particular, they exhibit a form of home bias that leads to higher exposure to the domestic relative...

We study banks' incentive to pool assets of heterogeneous quality when investors evaluate pools by extrapolating from limited sampling. Pooling assets of heterogeneous quality induces dispersion in investors' valuations without affecting their average. Prices are determined by market clearing...