00Thaler_FM i-xxvi.qxd

help explain the volatility puzzle, although we argue later that models with irrational beliefs also offer a plausible way of th ...

utility. In other words, they choose ω, the fraction of financial wealth in stocks, to maximize Eπυ[(1−ω)Rf,t+ 1 +ωRt+ 1 −1], (1 ...

large part a consumption puzzle: given the low volatility of consumption growth, why are investors so reluctant to buy a high re ...

second source of utility in Eq. (11), or in short, on b 0. As a way of thinking about this parameter, BHS note that when b 0 =0. ...

to allocate their portfolio between the two funds over the next month. They are then shown the realized returns over that month, ...

framework can be used for portfolio choice and pricing problems, even when state equations and objective functions are nonlinear ...

of dividend growth to drive the P/D ratio: restating the argument of Shiller (1981) and LeRoy and Porter (1981), if these foreca ...

law of small numbers, whereby people expect even short samples to reflect the properties of the parent population. If the invest ...

We close this section with a brief mention of “money illusion,” the con- fusion between real and nominal values first discussed ...

Here, ztis a state variable that tracks past gains and losses on the stock market. For any fixed zt, the function υ ̃is a piecew ...

Long-term Reversals. Every three years from 1926 to 1982, De Bondt and Thaler (1985) rank all stocks traded on the NYSE by their ...

other, they perform poorly.^25 A challenge to both behavioral and rational approaches is to explain why extending the formation ...

Event Studies of Stock Repurchases. Ikenberry, Lakonishok, and Vermae- len (1995) look at firms that announced a share repurchas ...

show that there is a value premium in the subsample of U.S. data that pre- cedes the data set used in Fama and French (1992), wh ...

note: just because a factor model happens to work well does not necessarily mean that we are learning anything about the economi ...

Finally, in some of the examples given above, it is not just that one port- folio outperforms another on average. In some cases, ...

This framework offers one way of modeling the updating biases de- scribed above. Including a “trending” regime in the model capt ...

that has recently gone up in value (De Long et al. 1990b, Barberis and Shleifer 2003). If a company’s stock price goes up this p ...

Hong, Lim, and Stein (2000) present supportive evidence for the view of Hong and Stein (1999) that momentum is due simply to slo ...

Harrison and Kreps (1978) and Scheinkman and Xiong (2003) argue that in a dynamic setting, a second, speculation-based mechanism ...