We present a new model of asset prices in which investors evaluate risk according to prospect theory and examine its ability to explain 22 prominent stock market anomalies. The model incorporates all the elements of prospect theory, takes account of investors' prior gains and losses, and makes...

Abstract We examine how owning a good affects learning and beliefs about its quality. We show that people have more extreme reactions to information about a good that they own compared to the same information about a non-owned good: ownership causes more optimistic beliefs after receiving a...

Using 14,800 forecasts of one-year S&P 500 returns made by Chief Financial Officers over a 12-year period, we track the individual executives who provide multiple forecasts to study how their beliefs evolve dynamically. While CFOs' return forecasts are systematically unbiased, their confidence...

Studies of human memory indicate that features of an event evoke memories of prior associated contextual states, which in turn become associated with the current event's features. This mechanism allows the remote past to influence the present, even as agents gradually update their beliefs about...

I examine gender differences in external equity financing using administrative data on the population of start-ups in France. Female-founded start-ups are 27% less likely to raise external equity including venture capital. However, the gender funding gap reverses in female-dominated sectors,...

Short-sale constrained past-winners and losers both underperform strongly in the first year post-formation, earning market-adjusted returns of −13%, and −17%, respectively. However, constrained winners continue to underperform for the following four years, earning a cumulative...