Economists have long recognized the importance of information veracity in valuing risky securities. Market participants concerned about the credibility of information measures may require additional compensation to entice them to hold stocks with less transparent information. These same...

In this paper we study whether the commodity futures market predicts the commodity spot market. Using historical daily data on four commodities—oil, gold, platinum, and silver—we find that they do. We then show how investors can use this information on the futures market to devise trading...

This study explores the effect of investor sentiment on the volatility forecasting power of option-implied information. We find that the risk-neutral skewness has the explanatory power regarding future volatility only during high sentiment periods. Furthermore, the implied volatility has varying...

Behavioral theories predict that firm valuation dispersion in the cross-section (“dispersion”) measures aggregate overpricing caused by investor overconfidence and should be negatively related to expected aggregate returns. This paper develops and tests these hypotheses. Consistent with the...

This study examines the influence of investor sentiment on the relationship between disagreement among investors and future stock market returns. We find that the relationship between disagreement and future stock market returns time-varies with the degree of investor sentiment. Higher...

Bali et al. (2011) uncover a new anomaly (the “MAX effect”) related to investors’ desire for stocks with lottery-like payoffs. Specifically, stocks with high maximum daily returns (high MAX) over the past month perform poorly relative to stocks with low maximum daily returns (low MAX) over...

When determining a stock to buy, Strahilevitz et al. (2011) demonstrate that individual investors often repurchase a stock previously traded for a profit as a learning process. When evaluating a decision, people use the most available information that comes to mind. We posit that the most...

We document a new investor preference we call the home-institution bias. Whereas the home-asset bias is a preference for domestic assets, the home-institution bias is a preference for domestic financial institutions. Our data come from Sweden’s government-mandated retirement system. In...

This paper provides primary evidence of whether certification via reputable underwriters is beneficial to investors in the corporate bond market. We focus on the high-yield bond market in which certification of issuer quality is most valuable to investors owing to low liquidity and issuing...

It is a commonly held view that gold protects investors’ wealth in the event of negative economic conditions. In this study, we test whether other metals offer similar or better investment opportunities in periods of market turmoil. Using a sample of 13 sovereign bonds, we show that other...