We attempt to explain post-earnings announcement drift using the newly documented refinement of the disposition effect, which is the V-shaped net selling propensity (VNSP). Using a novel data set containing stock-level information on the trading activities of different types of investors, we...

We analyze the value of investor relations (IR) strategies to IPO firms. We find that firms that are less visible and have inexperienced management tend to hire IR consultants prior to the issue date. IR consultants help create positive news coverage before an IPO event as reflected in a more...

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 examine the market mispricing and limits-to-arbitrage hypotheses on the positive relation between cash holdings and expected stock returns. Using investor sentiment as a proxy for market mispricing, we find that returns of cash holding stocks are heavily influenced by investor sentiment....

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...

We develop a continuous-time asset price model to capture short-run momentum and long-run reversal. By studying a dynamic asset allocation problem, we derive the optimal investment strategy in closed form and show that the combined momentum and reversal strategies are optimal. We then estimate...

Using proprietary data on millions of trades by retail investors, we provide the first large-scale evidence that retail short selling predicts negative stock returns. A portfolio that mimics weekly retail shorting earns an annualized risk-adjusted return of 9%. The predictive ability of retail...