We develop a model where overconfident investors overestimate their own signal quality but are skeptical of others'. Those investors who are initially uninformed believe that the early informed have learned little, leading the former investors to provide excess liquidity, which, in turn, causes...

High levels of turnover in financial markets are consistent with the notion that trading, like gambling, yields direct utility to some agents. We show that the presence of these agents attenuates covariance risk pricing and volatility, and implies a negative relation between volume and future...

How might markets exhibit both short-term reversals and longer-term momentum? Motivated by this question, we develop a dynamic model which includes noise traders and investors who underreact to signals that they do not themselves produce. Our setting implies the following: Return predictability...

DeVault, Sias, and Starks (2019) find a positive relation between institutional investors’ net buying of risky stocks and the contemporaneous change in market sentiment. They interpret this as evidence that institutional investors are sentiment traders, whose demand shocks drive prices from...