A frequent feature of information structures is that they generate signals which are not mutually independent, but rather rely on a common set of underlying information. Using a simple experimental design, we show that in such contexts many people neglect correlations in the updating process,...

How do households form their inflation expectations? We show the price changes individual consumers observe while shopping are a key determinant of their expectation for overall inflation. We use individual non-durable consumption choices in the Nielsen Homescan Panel to construct...

Psychology and economics (together known as behavioral economics) are two prominent disciplines underlying many theories in marketing. The extensive marketing literature documents consumers' nonrational behavior even though behavioral biases might not always be consistently termed or formally...

Habits and sentiment are key psychological behaviors in asset pricing. This paper studies the interactive impacts of sentiment and habits on asset pricing using the Campbell and Cochrane 1999 habit model as a framework model. A positive sentiment shock emanating from firms is modeled in the...