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We propose a new and direct measure of investor attention using search frequency in Google (Search Volume Index (SVI)). In a sample of Russell 3000 stocks from 2004 to 2008, we find that SVI (1) is correlated with but different from existing proxies of investor attention; (2) captures investor attention in a more timely fashion and (3) likely measures the(More)
This article provides several new insights into the economic sources of skewness. First, we document the differential pricing of individual equity options versus the market index and relate it to variations in return skewness. Second, we show how risk aversion introduces skewness in the risk-neutral density. Third, we derive laws that decompose individual(More)
Asset price bubbles, that is, asset prices that exceed the assets' fundamental value, have always been a subject of interest to economists. Clear identification of a price bubble is challenging, however, due to the difficulty in measuring an asset's fundamental value. There is an open debate about whether each historical episode constitutes a bubble. For(More)
This article offers a tractable monetary asset pricing model. In monetary economies, the price level, inflation, asset prices, and the real and nominal interest rates have to be determined simultaneously and in relation to each other. This link allows us to relate in closed form each of the dependent entities to the underlying real and monetary variables.(More)
The market dynamics of technology stocks in the late 1990s have stimulated a growing body of theory that analyzes the joint effects of short-sales constraints and heterogeneous beliefs on stock prices and trading volume. This paper examines several implications of these theories using a unique data sample from a market with stringent short-sales constraints(More)
for helpful discussions. Any remaining errors are our responsibility alone. Abstract This paper examines informed trading in the options versus the stock market prior to takeover announcements. Prior to an announcement, the percentage increase in call volume for target firms is roughly four times as large as the increase in stock volume. Moreover,(More)
This paper proposes and tests a flow-based explanation for three important empirical findings on return predictability – the persistence of mutual fund performance, the " smart money " effect, and stock price momentum. Since mutual fund managers generally scale up or down their existing positions in response to investment flows, and since the portfolios of(More)