David Hirshleifer

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Theoretical models predict that overconŽdent investors trade excessively. We test this prediction by partitioning investors on gender. Psychological research demonstrates that, in areas such as Žnance, men are more overconŽdent than women. Thus, theory predicts that men will trade more excessively than women. Using account data for over 35,000 households(More)
When a series of individuals with private information announce public predictions, initial conformity can create an “information cascade” in which later predictions match the early announcements. This paper reports an experiment in which private signals are draws from an unobserved urn. Subjects make predictions in sequence and are paid if they correctly(More)
We propose a theory of securities market underand overreactions based on two well-known psychological biases: investor overconfidence about the precision of private information; and biased self-attribution, which causes asymmetric shifts in investors’ confidence as a function of their investment outcomes. We show that overconfidence implies negative(More)
People are overconfident. Overconfidence affects financial markets. How depends on who in the market is overconfident and on how information is distributed. This paper examines markets in which price-taking traders, a strategic-trading insider, and risk-averse marketmakers are overconfident. Overconfidence increases expected trading volume, increases market(More)
I n 1995, management gurus Michael Treacy and Fred Wiersema secretly purchased 50,000 copies of their business strategy book The Discipline of Market Leaders from stores across the nation. The stores they purchased from just happened to be the ones whose sales are monitored to select books for the New York Times bestseller list. Despite mediocre reviews,(More)
The basic paradigm of asset pricing is in vibrant f lux. The purely rational approach is being subsumed by a broader approach based upon the psychology of investors. In this approach, security expected returns are determined by both risk and misvaluation. This survey sketches a framework for understanding decision biases, evaluates the a priori arguments(More)
At the end of 1997, the foreign companies listed in the U.S. have a Tobin’s q ratio that exceeds by 16.5% the q ratio of firms from the same country that are not listed in the U.S. The valuation difference is statistically significant and largest for exchange-listed firms, where it reaches 37%. The difference persists even after controlling for a number of(More)
We document a robust cross-sectional positive association across industries between a measure of the economic efficiency of corporate investment and the magnitude of firmspecific variation in stock returns. This finding is interesting for two reasons, neither of which is a priori obvious. First, it adds further support to the view that firm-specific return(More)