This paper applies a new measure of aggregate investor confidence, which extracts feedback impulses from stock market data. According to the measure, aggregate investor confidence is positively associated with the profitability of momentum strategies. In a 1927-2014 U.S. sample, aggregate...

Overconfidence is one of the most robust findings in the field of Behavioural Finance, and is associated with excessive trading and risk taking among market participants. Assessment of the level of confidence in their abilities and skills is well-documented for individuals. However, the...

This study investigates individual and institutional trading in competing firms around earnings announcements. We find individual and institutional informed trading in competing firms, which is dominant prior to earnings announcements. Magnitude of institutional (individual) net order flow...

Return chasing is often cited as one of the primary behavioral foibles of investors, resulting in sub-par returns. Surprisingly, the literature does not provide a generally accepted and testable description of return chasing. This paper proposes a simple definition. It then describes how return...

We study firm-level characteristics that a manager would employ as signalling tools in order to time the market (i.e. repurchases and issues). Following the market timing framework, we develop a two-factor asset pricing model comprising a “market” and a “mispricing” factor, which is able...

This study investigates individual and institutional trading activities before and after earnings announcements to infer informed trading in competing firms. We find evidence for individual and institutional informed trading in competing firms before earnings announcements. Magnitude of...

Motivated by standard portfolio theory, this paper incorporates ex-ante volatility estimates in the construction of winner-minus-loser stock momentum portfolio. I find that over the 1927-2015 period this leads to an increase in the Sharpe ratio from 0.34 to 1.14 and strongly reduced crash risk....

We utilize seventeen years of comprehensive daily portfolio and trading data identified at the individual investor level, to analyze the relative trading performance of the entire universe of households, all domestic financial institutions and all foreign institutions in the Finnish market. We...

This paper studies the trades immediately after the market open and immediately before the market close. The trades in the morning positively predict future returns and cause price continuation. The trades in the afternoon negatively predict future returns and cause price reversals. The momentum...

Modern Portfolio Theory, the Capital Asset Pricing Model, and the Efficient Market Hypothesis are cornerstone concepts in both academic and professional curricula. In spite of their long history and reputation, the CAPM and its extensions do not yield satisfactory empirical results. We argue...