Why do investors react to old information? We provide survey evidence to experimentally document that active finance professionals are more susceptible to old information when it comes as a recombination of content from multiple sources. To evaluate the market implications of this mechanism, we...

Traders differ in speed and their speed differences matter. I model strategic interactions induced when high frequency traders (HFTs) have different speeds in an extended Kyle (1985) framework. HFTs are assumed to anticipate incoming orders and trade rapidly to exploit normal-speed traders'...

Economic activities such as crowdfunding often involve sequential interactions, observational learning, and project implementation contingent on achieving certain thresholds of support. We incorporate endogenous all-or-nothing thresholds in a classic model of information cascade. We find that...

This experiment examines forecasting behavior under varying information conditions to assess the extent to which traders in security markets incorporate information in trading activity to resolve fundamental uncertainty and to resolve higher-order uncertainty. Fundamental uncertainty refers to a...

Why are stock prices much more volatile than the underlying dividends? The excess volatility of prices can in principle be attributed to two different causes: time-varying discount rates for expected future dividends, arising from variation in risk premia; or the irrational exuberance of...

The US Treasury effectively ”owns” about 24% of the stocks held by high income US taxable investors. Through the capital gains tax, Uncle Sam has an effective exposure of more than $1 trillion of equities. And this huge-but-silent investor might be about to get a lot bigger if capital gains...

We propose a simple measure of investor sophistication based on financial statement experience derived from publicly available EDGAR log data about accounting information acquisition activity. This approach allows us to provide unique empirical evidence for the existence of attention induced...

In this paper we survey the theoretical and empirical literatures on market liquidity. We organize both literatures around three basic questions: (a) how to measure illiquidity, (b) how illiquidity relates to underlying market imperfections and other asset characteristics, and (c) how...

This Article presents a case study in how complexity arising from the evolu- tion and proliferation of a financial innovation can increase systemic risk. The subject of the case study is the securitization of home loans, an innovation which played a critical and still not fully understood-role...