This study examines whether individual investors are the source of post- earnings announcement drift (PEAD). We provide evidence on how individual investors trade in response to extreme quarterly earnings surprises and on the relation between individual investors' trades and subsequent abnormal...

This paper tests the hypothesis that irrational market misvaluation affects firms' takeover behavior. We employ two contemporaneous proxies for market misvaluation, pre-takeover book/price ratios and pre-takeover ratios of residual income model value to price. Misvaluation of bidders and targets...

If investors have limited attention, then accounting outcomes that saliently highlight positive aspects of a firm's performance will promote high market valuations. When cumulative accounting value added (net operating income) over time outstrips cumulative cash value added (free cash flow), it...

Governments and vocal institutional shareholders have been exerting pressure on companies they deem to have objectionable operations (such as tobacco or chemical producers). This paper studies the effect of the most important legislative and shareholder boycott to date, the boycott of the South...

Ritter and Loughran~(1995a) and Spiess and Affleck-Graves~ (1995) document that firms issuing seasoned equity offerings (SEOs) severely underperform the stock market within five years after the offering. Our paper examines the hypothesis that SEO investors are too optimistic because they naively...

We document strong persistence in the performance of trades of individual investors. Investors classified in the top 10 percent place other trades that on average earn excess returns of 15 basis points per day. A rolling-forward strategy of going long firms purchased by previously successful...

We propose a theory based on investor overconfidence and biased self- attribution to explain several of the securities returns patterns that seem anomalous from the perspective of efficient markets with rational investors. The theory is based on two premises derived from evidence in...

This paper provides a model for valuing stocks that takes into account the stochastic processes for earnings and interest rates. Our analysis differs from past research of this type in being applicable to stocks that have a positive probability of zero or negative earnings. By avoiding the...

This paper examines how imperfect institutional memory affects organizational decisions. In our model, a manager knows his firm's previous actions but (owing, e.g., to turnover) not the rationale for these actions. If the environment is stable, we find that a firm that has followed an old policy...