In this paper we compute long-term stock return expectations (across the business cycle) for individual firms using information backed out from the credit derivatives market. Our methodology builds on previous theoretical results in the literature on stock return expectations and, empirically,...

This paper studies whether and why algorithmic traders exhibit one of the most broadlydocumented behavioral puzzles - the disposition effect. We use trade data from the NASDAQ Copenhagen Stock Exchange merged with the weather data. We find that on average, the disposition effect for human...

We document novel facts on the exit and reentry margins of stock market participation by retail investors using detailed administrative data on every Norwegian resident from 1993 to 2016. Contrary to the conventional view that individuals either never or always participate in the stock market,...

As early as 1934 Graham and Dodd conjectured that excess returns from value investment originate from a tendency of markets to converge towards fundamental values. This paper confirms their insights theoretically within the evolutionary finance model of Evstigneev, Hens, and Schenk-Hopp (2006)...

This paper intends to contribute to the theoretical literature on the determinants of exchange rate fluctuations. We build an agent-based model, based on behavioral assumptions inspired by the literature on behavioral finance and by empirical surveys about the behavior of foreign exchange...

Granting a third-party guarantee for a loan does not directly involve a financial transaction. Therefore, guarantors might not understand that they are taking on a liability, albeit contingent. We introduce literacy about guarantees as a novel and distinct aspect of financial literacy. For ten...

The aim of this paper is to study asset reallocation in financial markets subject to search, bargaining, and information frictions, and to analyze the impact of monetary policy on equilibrium outcomes. The main results show that private information regarding the quality of an asset impairs its...

We analyze how a benevolent, privately-informed government agency would optimally release information about the economy's growth rate when the agents hold heterogeneous beliefs. We model two types of agents: "trusting" and "distrustful." The former has a prior that is identical to that of the...

We use the Twitter-based Hedonometer happiness index to study the link between happiness and gold price changes. We find no significant correlation between the two when we look at correlations across the entire distributions. However, turning to an extreme value theory (EVT) modeling of the...

Individuals invest in Environmental-Social-Governance (ESG)-assets not only because of (higher) expected returns but also driven by ethical and social considerations. Less is known about ESG-conscious investor subjective beliefs about crypto-assets and how these compare to traditional assets....