Simple forecasts and paradigm shifts

Journal of Finance

Volumn 62, Issue 3, 2007, Pages 1207-1242

  Hong, Harrison ^a   Stein, Jeremy C ^b   Yu, Jialin ^c  

^a PRINCETON UNIVERSITY   (United States)

^b HARVARD UNIVERSITY   (United States)

^c Och Spine at New York Presbyterian Hospitals   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 34248138058     PISSN: 00221082     EISSN: 15406261     Source Type: Journal    
DOI: 10.1111/j.1540-6261.2007.01234.x     Document Type: Article

References (59)

1. Abelson, Robert P., 1978, Scripts, Invited address to the Midwestern Psychological Association, Chicago.
2. Abreu, Dilip, and Markus Brunnermeier, 2003, Bubbles and crashes, Econometrica 71, 173 204.
3. Ang, Andrew, and Jun Liu, 2004, How to discount cashflows with time-varying expected returns, Journal of Finance 59, 2745 2783.
4. Asness, Clifford S., 1997, The interaction of value and momentum strategies, Financial Analysts Journal 53, 29 39.
5. Barberis, Nicholas, Andrei Shleifer, and Robert W. Vishny, 1998, A model of investor sentiment, Journal of Financial Economics 49, 307 343.
6. Bernard, Victor L., and J. Thomas, 1989, Post-earnings announcement drift: Delayed price response or risk premium? Journal of Accounting Research 27, 1 48.
7. Bernard, Victor L., and J. Thomas, 1990, Evidence that stock prices do not fully reflect the implications of current earnings for future earnings, Journal of Accounting and Economics 13, 305 340.
8. Bernstein Quantitative Handbook, 2004 Sanford C. Bernstein & Co. LLC, a subsidiary of Alliance Capital Management LP, New York, NY).
9. Blanchard, Olivier J., and Mark W. Watson, 1982, Bubbles, rational expectations, and financial markets, in Paul Wachtel, ed. Crises in Economic and Financial Structure (Lexington Books, Lexington, MA).
10. Blume, Lawrence, Margaret M. Bray, and David Easley, 1982, Introduction to stability of rational expectations equilibrium, Journal of Economic Theory 26, 313 317.
11. Bray, Margaret M., and Nathan E. Savin, 1986, Rational expectations equilibrium, learning and model specification, Econometrica 54, 1129 1160.
12. Bruner, Jerome S., 1957, Going beyond the information given, in H. Gulber, and others, eds. Contemporary Approaches to Cognition (Harvard University Press, Cambridge, MA).
13. Bruner, Jerome S., and Leo Postman 1949, On the perception of incongruity: A paradigm, Journal of Personality 18, 206 223.
14. Chen, Joseph, Harrison Hong, and Jeremy C. Stein, 2001, Forecasting crashes: Trading volume, past returns and conditional skewness in stock prices, Journal of Financial Economics 61, 345 381.
15. Cyert, Richard M., and Morris H. DeGroot, 1974, Rational expectations and Bayesian analysis, Journal of Political Economy 82, 521 536.
16. Daniel, Kent D., David Hirshleifer, and Avanidhar Subrahmanyam, 1998, Investor psychology and security market under- and over-reactions, Journal of Finance 53, 1839 1885.
17. Della Vigna, Stefano, and Joshua Pollet, 2004, Attention, demographics and the stock market, Working paper, Harvard University.
18. Fama, Eugene F., and Kenneth R. French, 1992, The cross-section of expected returns, Journal of Finance 47, 427 465.
19. Fama, Eugene F., and James D. MacBeth, 1973, Risk, return, and equilibrium: Empirical tests, Journal of Political Economy, 81, 607 636.
20. Fiske, Susan T., and Shelley E. Taylor, 1991, Social Cognition, 2nd ed. (McGraw Hill, Inc., New York, NY).
21. Fudenberg, Drew, and David K. Levine, 1998, Learning in games: Where do we stand? European Economic Review 42, 631 639.
22. Harrison, J. Michael, and David M. Kreps, 1978, Speculative investor behavior in a stock market with heterogeneous expectations, Quarterly Journal of Economics 93, 323 336.
23. Hirshleifer, David, and Siew Hong Teoh, 2003, Limited attention, information disclosure and financial reporting, Journal of Accounting and Economics 36, 337 386.
24. Hong, Harrison, and Sven Rady, 2002, Strategic trading and learning about liquidity, Journal of Financial Markets 5, 419 450.
25. Hong, Harrison, and Jeremy C. Stein, 1999, A unified theory of underreaction, momentum trading and overreaction in asset markets, Journal of Finance 54, 2143 2184.
26. Hong, Harrison, and Jeremy C. Stein, 2003a, Differences of opinion, short-sales constraints and market crashes, Review of Financial Studies 16, 487 525.
27. Hong, Harrison, and Jeremy C. Stein, 2003b, Simple forecasts and paradigm shifts, NBER Working paper 10013.
28. Jegadeesh, Narasimhan, and Sheridan Titman, 1993, Returns to buying winners and selling losers: Implications for stock market efficiency, Journal of Finance 48, 93 130.
29. Kahneman, Daniel, and Amos Tversky, 1973, On the psychology of prediction, Psychological Review 80, 237 251.
30. Kandel, Eugene, and Neil D. Pearson, 1995, Differential interpretation of public signals and trade in speculative markets, Journal of Political Economy 103, 831 872.
31. Kuhn, Thomas S., 1962, The Structure of Scientific Revolutions (University of Chicago Press, Chicago, IL).
32. Kyle, Albert S., and F. Albert Wang, 1997, Speculation duopoly with agreement to disagree: Can overconfidence survive the market test? Journal of Finance 52, 2073 2090.
33. Lakonishok, Josef, Andrei Shleifer, and Robert W. Vishny, 1994, Contrarian investment, extrapolation and risk, Journal of Finance 49, 1541 1578.
34. Lee, Charles, and Bhaskaran Swaminathan, 2000, Price momentum and trading volume, Journal of Finance 55, 2017 2069.
35. Lewellen, Jonathan, and Jay Shanken, 2002, Learning, asset-pricing tests and market efficiency, Journal of Finance 57, 1113 1145.
36. Lord, Charles, Lee Ross, and Mark R. Lepper, 1979, Biased assimilation and attitude polarization: The effects of prior theories on subsequently considered evidence, Journal of Personality and Social Psychology 37, 2098 2109.
37. Miller, Edward, 1977, Risk, uncertainty, and divergence of opinion, Journal of Finance 32, 1151 1168.
38. Miyasawa, Koichi, 1961, On the convergence of learning processes in a 2 × 2 non-zero sum game, Research memorandum No. 33, Princeton University.
39. Morris, Stephen, 1996, Speculative investor behavior and learning, Quarterly Journal of Economics 111, 1111 1133.
40. Mullainathan, Sendhil, 2000, Thinking through categories, Working paper, MIT.
41. Newey, Whitney K., and Kenneth D. West, 1987, A simple positive-definite heteroskedasticity and autocorrelation consistent covariance matrix, Econometrica 55, 703 708.
42. Nisbett, Richard, and Lee Ross, 1980, Human Inference: Strategies and Shortcomings of Social Judgment (Prentice-Hall, Englewood Cliffs, NJ).
43. Odean, Terrance, 1998, Volume, volatility, price and profit when all traders are above average, Journal of Finance 53, 1887 1934.
44. O'Hara, Maureen, 1995, Market Microstructure Theory (Blackwell Publishers, Cambridge, MA).
45. Peng, Lin, and Wei Xiong, 2006, Investor attention, overconfidence and category learning, Journal of Financial Economics 80, 563 602.
46. Rabin, Matthew, and Joel L. Schrag, 1999, First impressions matter: A model of confirmatory bias, Quarterly Journal of Economics 114, 37 82.
47. Robinson, Julia, 1951, An iterative method of solving a game, Annals of Mathematics 24, 296 301.
48. Schank, Roger C., and Robert P. Abelson, 1977, Scripts, Plans, Goals and Understanding: An Introduction into Human Knowledge Structures (Lawrence Erlbaum Associates, Hillsdale, NJ).
49. Scheinkman, Jose, and Wei Xiong, 2003, Overconfidence and speculative bubbles, Journal of Political Economy 111, 1183 1219.
50. Shapley, Lloyd S., 1964, Some topics in two-person games, in M. Drescher, L. S. Shapley, and A. W. Tucker eds. Advances in Game Theory (Princeton University Press, Princeton, NJ).
51. Simon, Herbert A., 1982, Models of Bounded Rationality: Behavioral Economics and Business Organizations, vol. 2 (MIT Press, Cambridge, MA).
52. Sims, Christopher A., 2003, Implications of rational inattention, Journal of Monetary Economics 50, 665 690.
53. Swaminathan, Bhaskaran, and Charles Lee, 2000, Do stock prices overreact to earnings news? Working paper, Cornell University.
54. Taylor, Shelley E., and Jennifer C. Crocker, 1980, Schematic bases of social information processing, in E. Tory Higgins, C. Peter Herman, and Mark P. Zanna, eds. The Ontario Symposium on Personality and Social Psychology, vol. 1 (Larwrence Erlbaum, Hillsdale, NJ).
55. Timmermann, Allan, 1993, How learning in financial markets generates excess volatility and predictability in stock prices, Quarterly Journal of Economics 108, 1135 1145.
56. Tversky, Amos, and Daniel Kahneman, 1973, Availability: A heuristic for judging frequency and availability, Cognitive Psychology 5, 207 232.
57. Varian, Hal R., 1989, Differences of opinion in financial markets, in C. C. Stone, ed. Financial Risk: Theory, Evidence, and Implications: Proceedings of the 11th Annual Economic Policy Conference of the Federal Reserve Bank of St. Louis (Kluwer Academic Publishers, Boston, MA).
58. Veronesi, Pietro, 1999, Stock market overreaction to bad news in good times: A rational expectations equilibrium model, Review of Financial Studies 12, 975 1007.
59. Wang, Jiang, 1993, A model of intertemporal asset prices under asymmetric information, Review of Economic Studies 60, 249 282.