We theoretically show that there is a fundamental disconnect be- tween the disposition effect, i.e., investors’ tendency to sell winning assets too early and losing assets too late, and its common empirical measure, namely a positive difference between the proportion of gains and losses re-...

Greed has been shown to be an important economic motive. Both the popular press as well as scientific papers have mentioned questionable practices by greedy bankers and investors as one of the root causes of the 2008 global financial crisis. In spite of these suggestions, there is as of yet no...

Post-earnings-announcement drift (PEAD) is one of the most solidly documented asset pricing anomalies. We use the controlled conditions of an experimental lab to investigate whether earnings autocorrelation is the driving cause of this anomaly. We observe PEAD in settings with uncorrelated and...

Behavioral economics aspires to replace the agents of neoclassical economics with living, breathing human beings. Here, the author argues that behavioral economics, like its neoclassical counterpart, often neglects the role of active sense-making that motivates and guides much human behavior....

Behavioral economics characterizes decision-makers using psychologically-informed models. Cognitive science produces psychologically-informed models. Why don't these disciplines talk more? Here, the author presents several arguments for why cognitive science should inform behavioral economics -...

Overall, 72 subjects invest their endowment in four risky assets. Each com-bination of assets yields the same expected return and variance of returns. Illusion of expertise prevails when one prefers nevertheless the self-selected portfolio. After being randomly assigned to groups of four...