One explanation for overpricing on asset markets is a lack of traders' self-control. Self-control is the individual capacity to override or inhibit undesired impulses that may drive prices. We implement the first experiment to address the causal relationship between self-control abilities and...

This paper studies the equilibrium price of an asset that is traded in continuous time between N agents who have heterogeneous beliefs about the state process underlying the asset's payoff. We propose a tractable model where agents maximize expected returns under quadratic costs on inventories...

We extend the framework of trading strategies of Gatheral [2010] from single stocks to a pair of stocks. Our trading strategy with the executions of two round-trip trades can be described by the trading rates of the paired stocks and the ratio of their trading periods. By minimizing the...

This paper examines the relation between equity portfolio diversification choices of individual investors and stock returns. Using a six-year panel (1991-96) of individual investors, I find that stocks with less diversified individual investor clientele earn higher returns. A zero cost portfolio...

This paper documents that the payoffs from investing in growth stocks, as measured by the decile-rank distributions (DRD) of future revenues, earnings, investment, as well as stock returns, follow a bimodal U-shaped distribution. By contrast, the DRD of value stocks follow a traditional...

In this article we assess if German private investors gamble at the stock market. For this purpose, we replicate Kumar’s (2009) methodology and analyze the pricing of lottery-type stocks in the German stock market. We further employ data from Deutsche Bundesbank’s Securities Holdings...

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...

This paper investigates how technical trading systems exploit the momentum and reversal effects in the S&P 500 spot and futures market. The former is exploited by trend-following models, while the latter by contrarian models. In total, the performance of 2580 widely used models is analyzed. When...

The Post-Earnings Announcement Drift (PEAD) anomaly refers to the tendency of stock prices to continue drifting in the same direction as earnings surprises well through the subsequent earnings announcements; ignoring the autocorrelations in extreme earnings surprises across adjacent quarters....