We study the return predictability by idiosyncratic skewness and find that it is limited to stocks trading at a capital loss overhang. Our empirical results favor an explanation based on Prospect Theory as introduced by Kahneman and Tversky (1979). Stocks with high levels of idiosyncratic...

PurposeThis study aims to examine what underlies the estimated relation between idiosyncratic volatility and realized return.Design/methodology/approachIdiosyncratic volatility has a dual effect on stock pricing: it not only affects investors' expected return but also affects the efficiency of...

Fintech brokers engaging in a high-frequency trading payment for order flow (HFT-PFOF) model are compensated proportional to the amount of trading activity happening in their accounts. Intense competition for order flow incentivizes them to increase the marketability of stocks by introducing...

Motivated by cognitive theories verifying that investors have limited capacity to process information, we study the effects of information overload on stock market dynamics. We construct an information overload index using textual analysis tools on daily data from The New York Times since 1885....

In this paper, we propose a cross-sectional option momentum strategy that is based on the risk component of delta-hedged option returns. We find strong evidence of risk continuation in option returns. Specifically, options with a high risk component significantly outperform those with a low risk...

We analyze herding behavior in the Chinese stock markets in the context of the COVID-19 pandemic using the cross-sectional absolute deviation (CSAD) model proposed by Chang et al. (2000) to detect herding behavior in the time period between January 30, 2001, and June 12, 2020. We consider stock...

Post-earnings-announcement drift (PEAD) is one of the most solidly documented asset pricing anomalies. We use the controlled conditions of an experimental lab to investigate whether earnings autocorrelation is the driving cause of this anomaly. We observe PEAD in settings with uncorrelated and...

In this paper, I study how investing preferences of the relatively young, small, inexperienced, and well-connected individual investors on the Robinhood platform contrast with those of previously-studied individual investors. I find that unlike their predecessors, Robinhood investors do not have...

Our paper conducts textual analysis on sell-side analyst reports and online stock opinion articles, which recommend that investors buy stocks that, based on prior literature, trade at comparatively high prices and earn low future returns. We test whether the justifications provided in these buy...

This paper argues that the price-dividend ratio variability is explained in a large proportion by shocks affecting the subjective distribution of capital gain expectations: sentimental discount rate shocks affecting average beliefs explain at least 30\% and disagreement shocks up to 20\% of the...