Recent studies suggest that investor emotions might cause securities to be mispriced. We build an investment strategy around the mispricing opportunities identified in two papers that have examined how emotions influence investor reaction to earnings announcements. This strategy proves to be...

This study explores the nexus between investors’ sentiments and herding behavior toward the market consensus in the U.S. and Europe stock markets from January, 2005 to April, 2021. We document strong evidence of herding during periods characterized by high level of sentiments. Our results...

We introduce a novel method for training computer algorithms to measure news sentiment. Our approach leverages human-coded sentiment scores from over 200,000 newspaper articles to teach the computer to select words, word combinations, and their linear weights. In an out-of-sample test, examining...

This paper examines the equity market return predictability of institutional investor sentiment, in comparison to individual investor sentiment. Our findings suggest that institutional traders are informed, and that their sentiment helps tilting stock prices towards the intrinsic value. This is...

Using close to 800,000 transactions by 66,000 households in the United States and close to 2,000,000 transactions by 303,000 households in Finland, this paper shows that individual investors with longer holding periods choose to hold less liquid stocks in their portfolios, consistent with Amihud...

Using short sell transactions data from 2010 to 2016, this paper is the first to provide a comprehensive sample of short selling initiated by retail investors. We find that retail short selling can predict negative stock returns. A trading strategy that mimics weekly retail shorting earns an...

This paper examines whether momentum drives the disposition effect and vice versa in the US stock market. The results from the analysis of the Fama-Macbethregressions show that the disposition effect drives momentum but not the other way around. Furthermore, we find that this relationship varies...

We use a novel and unique dataset to measure attention to securities—individuals’ stock-following over time (watchlists)—to provide evidence that attention to securities reacts differently to various types of uncertainty. We find that market-wide uncertainty, measured by the VIX index,...

We propose a theory in which each stock's environmental, social, and governance (ESG) score plays two roles: 1) providing information about firm fundamentals and 2) affecting investor preferences. The solution to the investor's portfolio problem is characterized by an ESG-efficient frontier,...