The paper examines the implications arising from the effect of two cognitive biases, representativeness and conservatism, for securities price behaviour on the London Stock Exchange. In a single- and multi-factor framework of abnormal returns, the aspects of trend and consistency in the...

Using survey data on expectations of future stock returns, we recursively estimate the degree of extrapolative weighting in investors' beliefs (DOX). In an extrapolation framework, DOX determines the relative weight investors place on recent-versus-distant past returns. DOX varies considerably...

Using instant message communications and trading records of professional traders, we directly measure how investment information propagates in traders’ social networks and how it affects their trading decisions and performance. Traders are more likely to mention stocks with gains over losses,...

We examine the relative weights hedge fund investors attach to past information in the fund selection process. The weighting scheme appears inconsistent with econometric forecasting models that predict fund returns, alphas or Sharpe ratios. In particular, investor flows are highly sensitive to...

Fund managers can only exhibit selectivity through purchasing (selling) stocks that appreciate (depreciate) more frequently than expected from random occurrence, if stocks are incorrectly priced. We develop a method that can statistically identify fund managers that exhibit net, buy, and sell...

Stocks with high sentiment betas are more sensitive to investor sentiment, with more subjective valuations. We contend that sentiment beta also captures the duration of mispricing. Accordingly, stocks with high (low) sentiment betas provide opportunities for momentum (contrarian) traders. We...

Passive investing, particularly in emerging markets, has become an increasingly popular means of quick, “diversified” exposure to a particular segment of the markets. Defensive investors, as Benjamin Graham noted, would be best served owning a diversified list of leading companies. Yet it's...