We evaluate Eugene Fama's claim that stock prices do not exhibit price bubbles. Based on US industry returns 1926-2014 and international sector returns 1985-2014, we present four findings: (1) Fama is correct in that a sharp price increase of an industry portfolio does not, on average, predict...

We conduct a laboratory experiment on the determinants of beliefs about own and others' ability across different domains. A preliminary look at the data points to two distinct forces: miscalibration in estimating performance depending on the difficulty of tasks and gender stereotypes. We develop...

Chinese housing prices rose by over 10 percent per year in real terms between 2003 and 2014, and are now between two and ten times higher than the construction cost of apartments. At the same time, Chinese developers built 100 billion square feet of residential real estate. This boom has been...

We present a model of credit cycles arising from diagnostic expectations - a belief formation mechanism based on Kahneman and Tversky's (1972) representativeness heuristic. In this formulation, when forming their beliefs agents overweight future outcomes that have become more likely in light of...

We present an extrapolative model of bubbles. In the model, many investors form their demand for a risky asset by weighing two signals--an average of the asset's past price changes and the asset's degree of overvaluation. The two signals are in conflict, and investors "waver" over time in the...

Intro -- Contents -- Financial Innovation and Economic Crisis: An Introduction -- INVENTORS, PRODUCTS, AND INVESTORS IN FINANCE -- 1 Inventors in Finance: An Impressionistic History of the People Who Have Made Risk Management Work -- 2 Psychology and the Financial Crisis of 2007 - 2008 -- 3...

In the Anglo-American constitutional tradition, judicial checks and balances are often seen as crucial guarantees of freedom. Hayek distinguishes two ways in which the judiciary provides such checks and balances: judicial independence and constitutional review. We create a new database of...

Explanations of unethical behavior often neglect the role of competition, as opposed to greed, in assuring its spread. Using the examples of child labor, corruption, "excessive" executive pay, corporate earnings manipulation, and commercial activities by universities, this paper clarifies the...

We investigate the market for news under two assumptions: that readers hold beliefs that they like to see confirmed, and that newspapers can slant stories toward these beliefs. We show that, on the topics where readers share common beliefs, one should not expect accuracy even from competitive...

We present a model of efficient regulation along the lines of Demsetz (1967). In this model, setting up and running regulatory institutions takes a fixed cost, and therefore jurisdictions with larger populations affected by a given regulation are more likely to have them. Consistent with the...