Senior Fellows/Fellows

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Senior Fellows/Fellows

Naive Buying Diversification and Narrow Framing among Individual Investors

David HIRSHLEIFER, John GATHERGOOD, David LEAKE, Hiroaki SAKAGUCHI, Neil STEW
Individual investors buying multiple stocks on the same day often use a naïve diversification 1/N heuristic, dividing purchase value equally across stocks. Yet very few investors maintain a 1/N portfolio allocation. Instead, investors appear to narrowly frame their buy-day decision independently of...
Keywords: investor behavior, portfolio allocation, naive diversification, narrow bracketing
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Senior Fellows/Fellows

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Senior Fellows/Fellows

Attention, Social Interaction, and Investor Attraction to Lottery Stocks

David HIRSHLEIFER, Turan G. BALI, Lin PENG, Yi TANG
We test the hypothesis that retail investors' attraction to lottery stocks induces overvaluation, and is amplified by high attention and social interactions. The lottery premium (negative abnormal returns) is stronger for high-retail-ownership stocks—especially those that also have high analyst co...
Keywords: Preference for lottery-like stocks, investor attention, social interactions, social network, MAX, skewness, retail investors
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Senior Fellows/Fellows

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Senior Fellows/Fellows

Do Trade Creditors Possess Private Information? Evidence from Stock Returns

David HIRSHLEIFER, Ben LOURIE, Yifan LI, Thomas G. RUCHTI
Theories of customer supplier relationships hold that the private information of suppliers about buyers explains the use of trade credit even when there is a competitive banking sector. If suppliers possess private information about their buyers, then the buyer’s order size and ability to pay on t...
Keywords: trade credit, non-bank lending, customer-supplier relationships, Stock Returns, private information
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Senior Fellows/Fellows

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Senior Fellows/Fellows

How Important is the Global Financial Cycle? Evidence from Capital Flows

Andrew K. ROSE, Eugenio CERUTTI, Stijn CLAESSENS
This study quantifies the importance of a Global Financial Cycle (GFCy) for capital flows.  We use capital flow data dis-aggregated by direction and type between 1990Q1 and 2015Q4 for 85 countries, and conventional techniques, models and metrics.  Since the GFCy is an unobservable concept, we use ...
Keywords: empirical, data, center, country, panel, fit, VIX, equity, bonds, FDI, Credit
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Senior Fellows/Fellows

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Senior Fellows/Fellows

Why Have Negative Nominal Interest Rates Had Such a Small Effect on Bank Performance? Cross Country Evidence

Andrew K. ROSE, Jose A. LOPEZ, Mark M. SPIEGEL
We explore the effect of negative nominal interest rates on bank profitability and behavior using non‐structural techniques and a cross‐country panel of over 5,200 banks in 27 countries.  Our data set includes annual observations for Japanese and European banks between 2010 and 2017, and covers...
Keywords: zero, effective, lower, bound, data, firm, empirical, regression, panel, deposit, size
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