In Chinese culture, certain digits are lucky and others unlucky. We test how such numerological superstition affects financial decision in the China IPO market. We find that the frequency of lucky numerical stock listing codes exceeds what would be expected by chance. Also consistent with...

We offer a model in which sequences of individuals often converge upon poor decisions and are prone to fads, despite being able to communicate both past payoff outcomes and the private signals underlying past choices. This reflects direct and indirect action-based informational externalities;...

This paper provides a model for valuing stocks that takes into account the stochastic processes for earnings and interest rates. Our analysis differs from past research of this type in being applicable to stocks that have a positive probability of zero or negative earnings. By avoiding the...

Learning by observing the past decisions of others can help explain some otherwise puzzling phenomena about human behavior. For example, why do people tend to converge on similar behavior? Why is mass behavior prone to error and fads? The authors argue that the theory of observational learning,...

We analyze capital allocation in a conglomerate where divisional managers with uncertain abilities compete for promotion to CEO. A manager can sometimes gain by unobservably adding variance to divisional performance. Capital rationing can limit this distortion, increase productive efficiency,...

The authors show that the incentive for managers to build their reputations distorts firms' investment policies in favor of relatively safe projects, thereby aligning managers' interests with those of bondholders, even though managers are hired and fired by shareholders. This effect opposes the...

This article studies information blockages and the asymmetric release of information in a security market with fixed setup costs of trading. In this setting, "sidelined" investors may delay trading until price movements validate their private signals. Trading thereby internally generates the...

Two means by which commodity producers can reduce their exposure to quantity risk are share contracting and futures hedging. This paper explains the coexistence of these arrangements by showing that these will normally be complementary means of transferring risk. Share contracting by a purchaser...