This paper studies the effect of new fund flows on investment behavior and the resulting equilibrium price of risk. The Small Fund Industry model shows equilibria with overinvestment in unprofitable and underinvestment in profitable investment opportunities. The Large Fund Industry model derives...

We show that immediate and delayed abnormal returns following earnings announcement surprises differ across market states. Immediate abnormal returns are more sensitive to earnings surprises in down markets, while delayed abnormal returns are less sensitive; underreaction is attenuated in down...

Within this paper, we analyze the impact of Financial Times Deutschland (FTD) news on stock prices and trading volumes. Based on a sample of all news on German DAX, MDAX and SDAX companies published within the news section of the FTD between 2006 and 2010, our results show that articles that...

In this paper we address three main objections of behavioral finance to the theory of rational finance, considered as “anomalies” the theory of rational finance cannot explain: (i) Predictability of asset returns; (ii) The Equity Premium; (iii) The Volatility Puzzle. We offer resolutions of...

We investigate investor's correlated attention as a determinant of excess stock market comovement. We propose a novel proxy, "co-attention", that measures the correlation in demand for market-wide information across stock markets approximated by the Google Search Volume Index (SVI). Our results...

This paper investigates how investor sentiment affects stock market returns and evaluates the predictability power of sentiment indices on U.S. and EU stock market returns. As regards the American example, evidence shows that investor sentiment indices have an economic and statistical...

Purpose: People often face constraints such as a lack of time or information in taking decisions, which leads them to use heuristics. In these situations, fast and frugal rules may be useful for making adaptive decisions with fewer resources, even if it leads to suboptimal choices. When applied...

This paper tests whether fluctuations in investors' attention affect stock return comovement with national and global markets, and which stocks are most affected. We measure fluctuations in investor attention using 59 high-profile soccer matches played during stock market trading hours at the...

We examine whether Japanese households have begun to dissave and reduce their holdings of risky assets because of population aging over the period 2000–14. While there is little doubt that household savings have decreased, the true trend without a negative income shock in the early 2000s would...

Do investors reach for yield when interest rates are low, and how does this behavior influence house prices? This paper uses the unique setting of 17th-18th century Amsterdam to answer this question, using newly-collected archival data on investment portfolios and the universe of property...