Behavioral biases like disposition effect and over-confidence have received much attention as a potential driver of numerous anomalies observed in the markets. Also, it has been argued that information uncertainty tends to exacerbate these biases and induce stronger irrational behavior among...

We propose an alternative investment strategy for pairs trading using Archimedean copulas in order to cover a wider range of tail dependence patterns and apply it to the S&P 500 stocks from 1990 to 2015. Empirical results show that our mixed copula approach generates higher average and risk...

Behavioral biases like disposition effect and overconfidence have received much attention as a potential driver of numerous anomalies observed in the markets. Also, it has been argued that information uncertainty tends to exacerbate these biases and induce stronger irrational behavior among...

We study the tradeoff between direct and indirect stock investments through equity mutual funds for a utility-maximizing investor. Whereas direct investments impose higher transaction costs on the formation of a well-diversified portfolio, mutual funds charge fees for their services. Our results...

This paper examines the relation between equity portfolio diversification choices of individual investors and stock returns. Using a six-year panel (1991-96) of individual investors, I find that stocks with less diversified individual investor clientele earn higher returns. A zero cost portfolio...

When determining a stock to buy, Strahilevitz et al. (2011) demonstrate that individual investors often repurchase a stock previously traded for a profit as a learning process. When evaluating a decision, people use the most available information that comes to mind. We posit that the most...

The experience of fun plays a major role in the consumer society. Drawing on a grounded theory approach, we advance a psychological theory of consumer fun. Through an integration of in-depth interviews, narrative analyses, controlled experiments, structural equation modeling, and a...

Results from four experiments suggest that currencies such as loyalty-program points are overvalued. Different allocations of the same quantity of points across the same number of purchases (e.g., 100 points for each first, 200 for each second, 300 for each third purchase vs. 200 for each first,...

Anecdotal evidence suggests that investor protection affects the demand for equity, but existing theories emphasize only the effect of investor protection on the supply of equity. We build a model showing that the demand for equity is important in explaining financial development. If the level...

We investigate the determinants of a household's decision on whether to invest in risky financial assets. Financial theory suggests that with increasing labor income risk, the reluctance of households to hold stocks increases. We propose to measure income risk as the observed variation of...