We propose that stock-market participation is influenced by social interaction. In our model, any given "social" investor finds the market more attractive when more of his peers participate. We test this theory using data from the Health and Retirement Study, and find that social...

A mutual fund manager is more likely to buy (or sell) a particular stock in any quarter if other managers in the same city are buying (or selling) that same stock. This pattern shows up even when the fund manager and the stock in question are located far apart, so it is distinct from anything...

We examine security analysts' career concerns by relating their earnings forecasts to job separations. Relatively accurate forecasters are more likely to experience favorable career outcomes like moving up to a high-status brokerage house. Controlling for accuracy, analysts who are optimistic...

We model a market populated by two groups of boundedly rational agents: "newswatchers" and "momentum traders." Each newswatcher observes some private information, but fails to extract other newswatchers' information from prices. If information diffuses gradually across the population, prices...

Various theories have been proposed to explain momentum in stock returns. We test the gradual-information-diffusion model of Hong and Stein (1999) and establish three key results. First, once one moves past the very smallest stocks, the profitability of momentum strategies declines sharply with...

We study the asset pricing implications of learning in an environment in which the true model of the world is a multivariate one, but agents update only over the class of simple univariate models. Thus, if a particular simple model does a poor job of forecasting over a period of time, it is...

This paper examines the "term structure" of options' implied volatilities, using data on S&P 100 index options. Because implied volatility is strongly mean reverting, the implied volatility on a longer maturity option should move by less than one percent in response to a one percent move in the...

type="main" <title type="main">ABSTRACT</title> <p>Many believe that compensation, misaligned from shareholders’ value due to managerial entrenchment, caused financial firms to take risks before the financial crisis of 2008. We argue that, even in a classical principal-agent setting without entrenchment and with exogenous...</p>

We model the relationship between asset float (tradeable shares) and speculative bubbles. Investors with heterogeneous beliefs and short-sales constraints trade a stock with limited float because of insider lockups. A bubble arises as price overweighs optimists' beliefs and investors anticipate...