We find that investor sentiment should affect a firm's employment policy in a world with moral hazard and noise traders. Consistent with the model's predictions, we show that higher sentiment among US investors leads to: (1) higher employment growth worldwide; (2) lower labor productivity, as the...

We find that investor sentiment should affect a firm's employment policy in a world with moral hazard and noise traders. Consistent with the model's predictions, we show that higher sentiment among US investors leads to: (1) higher employment growth worldwide; (2) lower labor productivity, as the...

We develop a multi-country model with moral hazard and noise traders, and show that investor sentiment should affect employment growth both domestically and abroad. Using a large sample of international industry-level data, we find strong support for the model's predictions. We show that US...

Recent research shows that a high wage gap between managers and workers identifies better-performing firms, but the stock market does not seem to price this information. In this paper, we show that not all investors neglect pay inequality. Using a unique data set on German firms' employee...

Research shows that stocks with fluent names trade at higher prices. However, it is not clear whether fluency simply appeals to naive investors, or actually identifies better firms. In this paper, we disentangle these two explanations. Consistent with our theoretical model, we find that the...

In this paper, I identify a novel channel through which political beliefs affect investor behavior. Instead of considering differences of opinion between Republicans and Democrats, I analyze nonpartisan evaluations of the executive using Gallup's presidential approval ratings. I find that large...

I find that the optimal price of a bet for a risk-averse bookmaker is a function of elasticity of demand and the number of outcomes of the betting event. In the presence of shocks to the order flow, however, the optimal price can change, and large adjustments can create arbitrage opportunities...

I propose a Capital Asset Pricing Model in which investor demand exhibits a speculative component. In equilibrium, investors' optimal trade-off between diversification and speculation generates predictable patterns for stocks with extreme book-to-market ratios. Consistent with the model...

Political uncertainty is a key determinant of investment decisions. Specifically, the uncertainty that surrounds government policy makes beliefs noisier and depresses stock prices. In this paper, we explore whether institutional investors "herd", i.e., mimic each other's trades, in response to...

Previous research shows that high sentiment among U.S. investors increases real investment both domestically and abroad. In this paper, we show that high sentiment among U.S. investors also prompts financially developed countries to invest more in the United States, especially if they exhibit a...