This paper constructs a manager sentiment index based on the aggregated textual tone of corporate financial disclosures. We find that manager sentiment is a strong negative predictor of future aggregate stock market returns, with monthly in-sample and out-of-sample R2 of 9.75% and 8.38%,...

Cross-sectional predictability of returns by past prices, or momentum, is a lasting market anomaly. Previous research reports numerous ways to measure momentum and establishes a multitude of factors predicting its performance. The emerging machine learning asset pricing literature further...

Investors' return expectations are pivotal in stock markets, but the reasoning behind these expectations remains a black box for economists. This paper sheds light on economic agents' mental models - their subjective understanding - of the stock market, drawing on surveys with the US general...

Investors' return expectations are pivotal in stock markets, but the reasoning behind these expectations remains a black box for economists. This paper sheds light on economic agents' mental models - their subjective understanding - of the stock market, drawing on surveys with the US general...

We test and offer support to Merton's (1987) theory that difference in a stock's investor recognition affects its cost of capital. In the U.S. market, using the breadth of ownership among retail investors as a proxy for investor recognition, we show that a long-short portfolio based on the...

Pension funds have greater fiduciary responsibilities than mutual funds and are also more severely punished for poor performance. Thus pension funds may find it particularly risky to deviate from peers. Consistent with this view, we find that pension funds herd and that their herding negatively...

We introduce a measure of regret for stock market investors and investigate its cross-sectional asset pricing implications. We propose a theoretical framework in which investors experience regret due to not achieving the highest possible return in the same industry with their stock investment,...

Based on intraday data for a large cross section of individual stocks, we find that the risk component of stock returns exhibits strong intraday momentum, and this pattern holds from previous market close to 10:00, and every half hour since then until market close at 16:00. Strikingly, the...

We construct a parsimonious set of equity factors by sorting stocks according to the sociodemographic characteristics of the individual investors who own them. The analysis uses administrative data on the stockholdings of Norwegian investors in 1997-2018. Consistent with financial theory, a...

We find that investor attention proxies proposed in the literature collectively have a common component that has significant power in predicting stock market risk premium, both in-sample and out-of-sample. This common component is well extracted by using partial least squares, scaled principal...