It is shown that the volume of trade can be decomposed into proportional proxies for stochastic flows of good news and bad news into the market. Positive (good) information flows are assumed to increase the price of a financial vehicle while negative (bad) information flows decrease the price. For the majority of a sample of ten split-stocks it is shown that the proposed decomposition explains ...

Humans form beliefs asymmetrically; we tend to discount bad news but embrace good news. This reduced impact of unfavorable information on belief updating may have important societal implications, including the generation of financial market bubbles, ill preparedness in the face of natural disasters, and overly aggressive medical decisions. Here, we selectively improved people's tendency to inco...

We examine the valuation and capital allocation roles of voluntary disclosure when managers have private information regarding the firm’s investment opportunities, but an efficient market for corporate control influences their investment decisions. For managers with long-term stakes in the firm, the equilibrium disclosure region is two-tailed: only extreme good news and extreme bad news is disc...