00Thaler_FM i-xxvi.qxd

Appendix A: Covariance and Variance Calculations for the Basic Model Covariances and Variances of Section 2.B, and Proof of Prop ...

Proposition 5:Using standard normal distribution properties,
*=E[
P 1 , θ+η] (A3) It is straightforward to show that the ratio ...

For part 2, note that
*=k 1 s 1 +k 2 s 2 , where (A8) (A9) This implies that the distribution of
* conditional on θ+
is nor- m ...

When s 2 confirms s 2 (either s 1 =H, s 2 =Uor s 1 =L, s 2 =D), the player be- comes overconfident and acts as if his precision ...

The product ∆P 1 ∆P 2 can only take on two values, based upon the various signal combinations: (A24) (A25) Combining, E[∆P 1 ∆P ...

(A30) (A31) (A32) (A33) With two possible values for θ, there are now sixteen possible sets of {θ, s 1 , s 2 , s 3 ′} realizatio ...

temporarily let all signals have the same precision (i.e., q=r=p), with pC replacing pas the perceived precision of the first si ...

E[∆P 2 ∆P 3 ′]<0; (A50) E[∆P 3 ′∆P 3 ]>0; (A51) E[∆P 1 ∆P 3 ]<0, (A52) The magnitude of E[∆P 2 ∆P 3 ′] varies nonmonoto ...

References Admati, Anat, and Paul Pfleiderer, 1988, A theory of intraday patterns: Volume and price variability, Review of Finan ...

———, 2001, Overconfidence, arbitrage, and equilibrium asset pricing, Journal of Finance56, 921–65. Daniel, Kent D., and Sheridan ...

Grossman, Sanford J., and Joseph E. Stiglitz, 1980, On the impossibility of informa- tionally efficient markets, American Econom ...

Mikkelson, W., M. Megan Partch, and Kshiti Shah, 1997, Ownership and operating performance of companies that go public, Journal ...

PART IV Theories of Overreaction and Underreaction ...

...

Chapter 12 A MODEL OF INVESTOR SENTIMENT Nicholas Barberis, Andrei Shleifer, and Robert W. Vishny 1.Introduction Recent empirica ...

The authors believe that their three-factor model can account for the over- reaction evidence, but not for the continuation of s ...

completely and investor sentiment affects security prices in equilibrium. In the model below, investor sentiment is indeed in pa ...

2.The Evidence In this section, we summarize the statistical evidence of underreaction and overreaction in security returns. We ...

(1992) surveys one class of such studies, which deals with the underreac- tion of stock prices to announcements of company earni ...

evidence that over a six-month horizon, stock returns are positively auto- correlated. Similarly to the earnings drift evidence, ...