We present the case for centrality of overreaction in expectations addressing important challenges finance and macroeconomics. First, non-rational by market participants can be measured modeled ways that address some key posed rational revolution, most importantly idea economic agents are forward-looking. Second, belief account many long-standing empirical puzzles macro finance, which emphasize...

This paper presents a Heterogeneous Agent Model of a financial market with chartist and fundamentalist traders that exhibit bounded rationality and short-term thinking to explain the effect of under and overreaction to news. The existence of the Market Maker’s finite price adjustment speed and the presence of risk aversion lead to the fact that prices do not adjust instantaneously to new inform...

Prior archival studies of analysts’ forecasts have found evidence for systematic underreaction, systematic overreaction, and systematic optimism bias. Easterwood and Nutt (1999) attempt to reconcile the conflicting evidence by testing the robustness of Abarbanell and Bernard’s (1992) underreaction results to the nature of the information. Consistent with systematic optimism, forecasts are found...

The oral cavity has long been considered a potential reservoir for respiratory pathogens. The mechanisms of infection could be aspiration into the lung of oral pathogens capable of causing pneumonia, colonization of dental plaque by respiratory pathogens followed by aspiration, or facilitation by periodontal pathogens of colonization of the upper airway by pulmonary pathogens. Several anaerobic...

Respiratory diseases are responsible for a significant number of deaths and considerable suffering in humans. Accumulating evidence suggests that oral disorders, particularly periodontal disease, may influence the course of respiratory infections like bacterial pneumonia and chronic obstructive pulmonary disease (COPD). Oral periodontopathic bacteria can be aspirated into the lung causing aspir...

This study investigates the algorithm of effective option trading strategy based on the superior volatility forecasts using actual option price data in Taiwan stock market. Forecast evaluation supports the significant incremental explanatory power of investor sentiments on the fitting and forecasting of future volatility to its adversarial multiple-factor model, especially the market turnover a...

Recent empirical research in nance has uncovered two families of pervasive regularities: underreaction of stock prices to news such as earnings announcements, and overreaction of stock prices to a series of good or bad news. In this paper, we present a parsimonious model of investor sentiment, or of how investors form beliefs, which is consistent with the empirical ndings. The model is based on...

We test the predictions of the three main behavioral finance theories of market underand overreaction using out-of-sample data conditional on the nature of the news using the goingconcern audit opinion (bad news event) and its withdrawal (good news event). We find strong support for the Daniel, Hirshleifer and Subrahmanyam (1998) model for our bad news as well as the good news case suggesting t...