We develop a DSGE model in which aggregate shocks induce endogenous movements in risk. The key feature of our model is that households rebalance their financial portfolio allocations infrequently, as they face a fixed cost of transferring cash across accounts. We show that the model can account...

This paper provides novel findings on idiosyncratic momentum in commodity futures. Momentum strategy that forms portfolios on the basis of commodity-specific returns delivers compelling investment returns which are substantially more robust and superior to total return momentum on an absolute...

Are stocks' varying sensitivies to changing investor attention and sentiment priced? Employing internet search-based proxies for both, I find novel results that are consistent with theory. Stocks that co-vary negatively with increased investor attention to the stock market outperform in the...

Behavioral finance presented in Finance for Normal People is a second generation behavioral finance. The first generation, starting in the early 1980s, largely accepted standard finance's notion of people's wants as “rational” wants – restricted to the utilitarian benefits of high returns...

We analyze the flow of money between mutual fund categories, finding strong evidence of seasonality in investor risk aversion. Aggregate investor flow data reveal investor preference for safe mutual funds in autumn and risky funds in spring. During September alone, outflows from equity funds...

We present empirical evidence that collective investor behavior can be inferred from large-scale Wikipedia search data for individual-level stocks. Using Shannon transfer entropy, a model-free measure that considers any kind of statistical dependence between time series, we investigate the...

We investigate the role of mutual fund flows in incorporating market sentiment into asset prices. We show that retail investors adjust their investments among mutual fund categories in response to changes in market sentiment. Consistent with sentiment-induced price pressure through fund flows,...

We create a market-wide measure of dispersion in options investors' expectations by aggregating across all stocks the dispersion in trading volume across moneynesses (DISP). DISP exhibits strong negative predictive power for future market returns and its information content is not subsumed by...

This paper sheds empirical light on whether sentiment affects the profitability of price momentum strategies. We hypothesize that news that contradicts investors' sentiment causes cognitive dissonance, which slows the diffusion of signals that oppose the direction of sentiment. This phenomenon...