We study the real effects of credit market sentiment on corporate investment and financing for a comprehensive panel of U.S. public and private firms over 1963-2016. In the short term, we find that high credit market sentiment in year t correlates with high corporate investment and debt issuance...

The curvature of intramonth stock price paths, which is distinct from cumulative return over the same period, contains significant additional return predictive power. In the cross section, stocks with the least convex price paths subsequently outperform stocks with the most convex price paths....

This paper proposes a latent-variables approach to recover biases in beliefs directly from asset prices. We focus on return extrapolation, a bias in expectations formation that has received considerable attention in recent asset pricing research. We estimate a present-value model of the...

We provide empirical evidence that the optimism bias increases with the forecasting horizon. We label this empirical regularity the horizon bias. In the US and abroad, professional forecasters demonstrate significant horizon bias in their macroeconomic expectations. Our results show a horizon...

We form a belief-based equity market sentiment index, BBS, from investors' survey-based expectations of future aggregate stock returns. BBS spans 54 years, accommodates belief heterogeneity across different investor types, and accounts for variation in the participation of these investors in the...

Political and regulatory uncertainty is strongly negatively associated with merger and acquisition activity at the macro and firm levels. The strongest effects are for uncertainty regarding taxes, government spending, monetary and fiscal policies, and regulation. Consistent with a real options...

Ample evidence suggests that individuals are overly optimistic about future outcomes. But does the length of a particular forecast horizon affect optimism levels? In this paper, we extend Brunnermeier and Parker's (2005) optimal expectations framework to a multi-period model, which casts the...