| • | De Bondt, Werner, and Richard Thaler (1995), “Financial Decision Making in Markets and Firms”, in Jarrow, Maksimovic, and Ziemba (eds.) Finance, Elsevier-North Holland. |
|
| • | Shiller, Robert (1984), “Stock Prices and Social Dynamics”, Brookings Papers on Economic Activity 2, 457-498 [in Advances, Ch.7.] |
|
| • | Inefficient Markets, Ch. 2, 4. |
|
DeLong, J. Bradford, Andrei Shleifer, Lawrence H. Summers, and Robert Waldmann, "Noise |
Trader Risk in Financial Markets", Journal of Political Economy 98, 703-738 [in Advances, |
Ch.2, also covered in Inefficient Markets Ch.2.] |
Shleifer, Andrei, and Robert Vishny (1997), “Limits of Arbitrage”, Journal of Finance 52, 35-55 |
[covered in Inefficient Markets Ch .4] |
Lamont, Owen (2000), “Guilty as Charged: Violations of the Law of One Price in Financial |
Markets,” University of Chicago. |
Lamont, Owen, and Richard Thaler (2000), “Can the Market Add and Subtract? Mispricing in |
Tech Stock Carve-Outs,” Working Paper, University of Chicago. |
Shleifer, Andrei (1986), “Do Demand Curves for Stocks Slope Down?” Journal of Finance 41, |
*Wurgler, Jeff, and Katya Zhuravskaya (1999), “Does Arbitrage Flatten Demand Curves for |
Stocks?”, Working Paper, Yale University.
| 3. | EVIDENCE FROM PSYCHOLOGY |
|
Camerer, Colin (1995), “Individual Decision Making”, in Kagel and Roth (eds.), Handbook of |
Experimental Economics, Princeton University Press.
*Kahneman, Daniel, and Mark Riepe (1998), “Aspects of Investor Psychology”, Journal of |
Portfolio Management 24, 52-65.
*Kahneman, Daniel, and Amos Tversky (1974), “Judgment Under Uncertainty: Heuristics and |
Biases”, Science 185, 1124-31.
*Kahneman, Daniel, and Amos Tversky (1979), “Prospect Theory: An Analysis of Decision |
Under Risk”, Econometrica 47, 263-91.
Rabin, Matthew (1998), “Psychology and Economics”, Journal of Economic Literature, 11-46. |
*Rabin, Matthew, and Richard Thaler (2000), “Risk Aversion,” forthcoming Journal of |
Economic Perspectives.
Thaler, Richard (1999), “Mental Accounting Matters”, Working Paper, University of Chicago. |
| 4. | APPLICATION: CLOSED-END FUNDS |
|
*Inefficient Markets, Ch. 3. [Also covered in Advances, Ch.3]. |
Pontiff, Jeff (1996), “Costly Arbitrage: Evidence from Closed-end funds”, Quarterly Journal of |
Economics 111, 1135-52.
| 5. | APPLICATION: THE AGGREGATE STOCK MARKET |
|
a) Facts and Rational Approaches |
Campbell, John Y. (1998), "Asset Prices, Consumption, and the Business Cycle", forthcoming in |
Taylor and Woodford (eds.) Handbook of Macroeconomics, North-Holland. |
*Campbell, John Y. and Robert J. Shiller (Winter 1998), "Valuation Ratios and the Long-Run |
Stock Market Outlook", Journal of Portfolio Management. |
Cochrane, John, “Where is the Market Going? Uncertain Facts and Novel Theories”, Economic |
Perspectives, Federal Reserve Bank of Chicago, November/December 1997. |
Fama, Eugene F. and Kenneth R. French (1988), “Dividend Yields and Expected Stock Returns”, |
Journal of Financial Economics 22, 3-25. |
Mehra, Rajnish and Edward Prescott (1985), "The Equity Premium: A Puzzle", Journal of |
Monetary Economics 15, 145-161.
*Shiller, Robert (1981), “Do Stock Prices Move too Much to be Justified by Subsequent Changes |
in Dividends?”, American Economic Review 71, 421-436 [in Advances, Ch.4.] |
b) Behavioral Approaches (equity premium puzzle) |
*Barberis, Nicholas, Ming Huang, and Tano Santos (2001), “Prospect Theory and Asset Prices”, |
forthcoming, Quarterly Journal of Economics. |
*Bernartzi, Shlomo, and Richard Thaler (1995), “Myopic Loss Aversion and the Equity Premium |
Puzzle”, Quarterly Journal of Economics 110, 75-92. |
Benartzi, Shlomo, and Richard Thaler (1999), “Risk Aversion or Myopia? Choices in Repeated |
Gambles and Retirement Investments,” Management Science 45, 364-381. |
Gneezy, Uri, and Jan Potters (1997), “An Experiment on Risk Taking and Evaluation Periods”, |
Quarterly Journal of Economics 112, 631-645. |
Maenhout, Pascal (2000), “Robust Portfolio Rules and Asset Pricing”, working paper, Harvard |
Thaler, Richard, Amos Tversky, Daniel Kahneman, and Alan Schwartz (1997), “The Effect of |
Myopia and Loss Aversion on Risk-Taking: An Experimental Test”, Quarterly Journal of |
Economics 112, 647-661.
c) Behavioral Approaches (volatility puzzle) |
Barksy, Robert, and Brad De Long (1992), “Why does the stock market fluctuate?”, Quarterly |
Journal of Economics 107, 291-311. |
Modigliani, Franco and Richard Cohn (1974), “Inflation and the Stock Market, Financial |
Analysts Journal 35, 24-44.
Thaler, Richard, and Eric Johnson (1985), “Gambling with the House Money and Trying to |
Break Even: The Effects of Prior Outcomes on Risky Choice”, Management Science 36, 643- |
| 6. | APPLICATION: THE CROSS-SECTION OF AVERAGE RETURNS |
|
Banz, Rolf (1981), “The Relation between Return and Market Value of Common Stocks”, |
Journal of Financial Economics 9, 3-18. |
*Bernard, Victor (1992), “Stock Price Reactions to Earnings Announcements”, in Thaler (ed.) |
Advances in Behavioral Finance, ch.11. |
Chopra, Navin, Josef Lakonishok, and Jay Ritter (1992), “Measuring Abnormal Performance: Do |
stocks overreact?”, Journal of Financial Economics 31: 235-268 [in Advances, Ch.10] |
Cochrane, John, “New Facts in Finance”, Economic Perspectives, Federal Reserve Bank of |
Chicago, Third Quarter 1999.
*De Bondt, Werner, and Richard Thaler (1985), “Does the Stock Market Overreact?”, Journal of |
Finance 40, 793-808 [in Advances, Ch.9.]
Fama, Eugene (1991), "Efficient Capital Markets: II", Journal of Finance 46, 1575-1618. |
Fama, Eugene F. and Kenneth R. French (1992),"The Cross-Section of Expected Stock Returns", |
Journal of Finance 47, 427-465. |
Ikenberry, David, Josef Lakonishok, and Theo Vermaelen (1995), “Market Underreaction to |
Open Market Share Repurchases”, Journal of Financial Economics 39, 181-208. |
*Jegadeesh, Narasimhan and Sheridan Titman (1993), "Returns to Buying Winners and Selling |
Losers: Implications for Stock Market Efficiency", Journal of Finance 48, 65-91. |
La Porta, Rafael (1996), “Expectations and the Cross-Section of Returns”, Journal of Finance |
*Lakonishok, Josef, Andrei Shleifer, and Robert W. Vishny (1994), "Contrarian Investment, |
Extrapolation, and Risk", Journal of Finance 49, 1541-1578. |
La Porta, Rafael, Josef Lakonishok, Andrei Shleifer, and Robert W. Vishny (1994), "Good News |
for Value Stocks: Further Evidence on Market Efficiency”, Journal of Finance 49, 1541-1578. |
Lakonishok, Josef and Seymour Smidt (1988), “Are Seasonal Anomalies Real? A Ninety Year |
Perspective”, Review of Financial Studies 3, 257-280. |
*Loughran, Tim, and Jay Ritter (1995), “The New Issues Puzzle”, Journal of Finance 50, 23-50. |
Michaely, Roni, Richard Thaler, and Kent Womack, “Price Reactions to Dividend Initiations and |
Omissions”, Journal of Finance 50, 573-608. |
Daniel, Kent and Sheridan Titman (1997), "Evidence on the Characteristics of Cross-Sectional |
Variation in Stock Returns", Journal of Finance 52, 1-33. |
Fama, Eugene F. and Kenneth R. French (1993), “Common Risk Factors in the Returns of Bonds |
and Stocks”, Journal of Financial Economics 33, 3-56. |
Fama, Eugene F. and Kenneth R. French (1996), "Multifactor Explanations of Asset Pricing |
Anomalies", Journal of Finance 51, 55-84. |
c) Behavioral Approaches (Beliefs) |
*Inefficient Markets, Ch. 6 |
*Barberis, Nicholas, Andrei Shleifer, and Robert Vishny (1998), "A Model of Investor |
Sentiment", Journal of Financial Economics 49, 307-345 [in Inefficient Markets, Ch.5.] |
*Daniel, Kent, David Hirshleifer, and Avanidhar Subrahmanyam (1998), “Investor Psychology |
and Security Market Under- and Overreactions”, Journal of Finance 53, 1839-1885 [available on |
Daniel, Kent, David Hirshleifer, and Avanidhar Subrahmanyam (2001), “Covariance Risk, |
Mispricing, and the Cross-section of Security Returns”, forthcoming Journal of Finance. |
De Long, Brad, Andrei Shleifer, Lawrence Summers, Michael Waldmann (1990), “Positive
Feedback Investment Strategies and Destabilizing Rational Speculation”, Journal of Finance 45, |
375-395 [covered in Inefficient Markets, Ch.6] |
Fama, Eugene F. (1998), "Market Efficiency, Long-Term Returns, and Behavioral Finance", |
Journal of Financial Economics 49, 283-307. |
*Hong, Harrison, and Jeremy Stein (1999), “A Unified Theory of Underreaction, Momentum |
Trading, and Overreaction in Asset Markets”, Journal of Finance 54, 2143-2184 [available on |
Hong’s website at www-gsb.stanford.edu] |
Hong, Harrison, Terence Lim, and Jeremy Stein (2000), “Bad News Travels Slowly: Size, |
Analyst Coverage, and the Profitability of Momentum Strategies”, Journal of Finance 55, 265- |
d) Behavioral Approaches (Beliefs + Institutional Frictions) |
Chen, Joseph, Harrison Hong, and Jeremy Stein (2000), “Breadth of Ownership and Stock |
Returns”, working paper, Stanford University. |
Hong, Harrison, and Jeremy Stein (1999), “Differences of Opinion, Rational Arbitrage, and |
Market Crashes”, working paper, Stanford University. |
Hong Harrison, Joseph Chen and Jeremy Stein (2001), “Forecasting Crashes: Trading Volume, |
Past Returns and Conditional Skewness in Stock Prices”, forthcoming Journal of Financial |
Scherbina, Anna (2000), “Stock Prices and Differences of Opinion: Empirical Evidence that |
Stock Prices Reflect Optimism”, working paper, Northwestern University. |
e) Behavioral Approaches (Preferences) |
*Barberis, Nicholas, and Ming Huang (2001), “Mental Accounting, Loss Aversion, and |
Individual Stock Returns”, forthcoming, Journal of Finance [available on UC web site] |
| 7. | APPLICATION: INVESTOR BEHAVIOR |
|
Barber, Brad, and Terrance Odean (2001), “Boys will be Boys: Gender, Overconfidence, and |
Common Stock Investment,” forthcoming Quarterly Journal of Economics. |
Barber, Brad, and Terrance Odean (2000), “Online Investors: Do the Slow Die First?”, working |
Barber, Brad, Terrance Odean, and Lu Zheng (2000), “The Behavior of Mutual Fund Investors”, |
Benartzi, Shlomo, and Richard Thaler (1998), “Naïve Diversification Strategies in Defined |
Contribution Savings Plans”, working paper, UCLA. |
Genesove, and Mayer (2001), “Loss Aversion and Seller Behavior: Evidence from the Housing |
Market”, forthcoming, Quarterly Journal of Economics. |
Grinblatt, Mark, and Matti Keloharju, “Distance, Language, and Culture Bias: The Role of |
Investor Sophistication,” working paper, Yale University. |
Heath, Chip, Steven Huddart and Mark Lang, “Psychological Factors and Stock Option |
Exercises”, Quarterly Journal of Economics 114, 601-627. |
Huberman, Gur, “Familiarity Breeds Investment”, working paper, Columbia University. |
*Odean, Terrance (1998), “Are Investors Reluctant to Realize their Losses”, Journal of Finance |
*Odean, Terrance (1998), “Do Investors Trade Too Much?” American Economic Review 89, |
| 8. | APPLICATION: CORPORATE FINANCE |
|
*Inefficient Markets, Ch.7. |
*Baker, Malcolm, and Jeffrey Wurgler (2000), “The Equity Share in New Issues and Aggregate |
Stock Returns,” Journal of Finance 55, 2219-2257. |
*Baker, Malcolm, and Jeffrey Wurgler (2000), “Market Timing and Capital Structure”, working |
Blanchard, Olivier, Changyong Rhee, and Lawrence Summers (1993), “The Stock Market, Profit, |
and Investment”, Quarterly Journal of Economics. |
Heaton, J.B., “Managerial Optimism and Corporate Finance”, working paper, University of |
Lintner, John (1956), “Distribution of Incomes of Corporations among Dividends, Retained |
Earnings and Taxes”, American Economic Review 46, 97-113. |
*Miller, Merton (1986), “Behavioral Rationality in Finance: The Case of Dividends”, in Hogarth |
and Reder (eds.) Rational Choice, University of Chicago Press. |
Morck, Randall, Andrei Shleifer, and Robert Vishny (1993), “The Stock Market and Investment: |
Is the Market a Sideshow?” Brookings Papers on Economic Activity. |
*Roll, Richard (1986), “The Hubris Hypothesis of Corporate Takeovers,” Journal of Business |
59, 197-216 [in Advances, Ch.17]. |
*Shefrin, Hersh and Meir Statman (1984), “Explaining Investor Preference for Cash Dividends”, |
Journal of Financial Economics 13, 253-282 [in Advances, Ch.15]. |
*Stein, Jeremy (1996), “Rational Capital Budgeting in an Irrational World”, Journal of Business |
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