This study investigates whether retail and institutional investors concentrate their trading among certain stock categories (i.e., habitats) and whether their trading activities generate return comovements among stocks within those habitats. Our results indicate that both retail and...

This paper examines whether the trading activities of retail and institutional investors cause comovements in stock returns. Using stock splits and headquarters changes events and a variety of trading-based measures, we show directly that retail investors generate excess comovements in stock...

In the standard regression of bidder announcement returns (ACARs) on bidder size in US data from 1981-2014, the coefficient on bidder size is positive and significant (0.5, t = 3.9) when the target is a public firm, where the average ACAR is negative (−1.4%); but it is negative and significant...

We develop a tractable equilibrium asset pricing model with Cumulative Prospect Theory (CPT) preferences. Using GMM on a sample of U.S. equity index option returns, we show that by introducing a single common probability weighting parameter for both tails of the return distribution, the CPT...

We show that mutual fund managers' trading experiences bias their future repurchasing decisions. Specifically, a fund is 17% more likely to repurchase a stock when it previously sold the stock for a gain rather than for a loss. Fund managers still prefer to repurchase stocks they sold for a gain...

We investigate the impact of fraud risk - measured by the probability for earnings overstatements - on a firm's future stock market performance. Based on an out-of-sample estimation of individual firms' fraud risk, we find that stocks with higher fraud risk earn significantly lower stock market...