We find a positive association between short-selling and accruals during 1988-2009, and that asymmetry between the long and short sides of the accrual anomaly is stronger when constraints on short-arbitrage are more severe (low availability of loanable shares as proxied by institutional...

We examine the causal effect of limits to arbitrage on 11 well-known asset pricing anomalies using the pilot program of Regulation SHO, which relaxed short-sale constraints for a quasi-random set of pilot stocks, as a natural experiment. We find that the anomalies became weaker on portfolios...

This study tests whether naïve trading by individual investors, or some class of individual investors, causes post-earnings announcement drift (PEAD). Inconsistent with the individual trading hypothesis, individual investor trading fails to subsume any of the power of extreme earnings surprises...

We document strong persistence in the performance of trades of individual investors. The correlation of the risk-adjusted performance of an individual across sample periods is about 10 percent. Investors classified in the top performance decile in the first half of our sample subsequently...

This paper models firms' choices between alternative means of presenting information, and the effects of different presentations on market prices when investors have limited attention and processing power. In a market equilibrium with partially attentive investors, we examine the effects of...

We offer a model in which sequences of individuals often converge upon poor decisions and are prone to fads, despite communication of the payoff outcomes from past choices. This reflects both direct and indirect action-based information externalities. In contrast with previous cascades...

We examine how investor preferences and beliefs affect trading in relation to past gains and losses. The probability of selling as a function of profit is V-shaped; at short holding periods, investors are more likely to sell big losers than small ones. There is little evidence of an upward jump in...

These slides correspond to the paper "Cosmetic Surgery in the Academic Review Process" Has the academic review process become excessive? I describe a model in which reviewers who seek reputations with editors for high skill recommend the repair of mere blemishes as well as significant flaws....

We review here theory and evidence relating to herd behavior, payoff and reputational interactions, social learning, and informational cascades in capital markets. We offer a simple taxonomy of effects, and evaluate how alternative theories may help explain evidence on the behavior of investors,...

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,...