Investors’ previous experiences with a stock affect their willingness to repurchase that stock. Using detailed trade data from two brokers, the authors document that investors are reluctant to repurchase stocks previously sold for a loss and stocks that have risen in price subsequent to a prior sale. The authors propose that this behavior reflects investors’ emotional reactions to trading and t...

This chapter presents an artificial stock market created to analyze market dynamics from the behavior of investors. It argues that information—delivered by financial intermediaries as rating agencies and considered as cognitive institution—directs the decisions of investors who are heterogeneous agents endowed with capabilities of learning in a changing environment. The objective is to demonstr...

A richer understanding of electronic markets is obtained when their implications for consumers are jointly studied from social, psychological, and economic perspectives. We adopt this perspective triad to build a Social-Economic-Psychological (SEP) Model of technology adoption and usage, and apply the model to understand and explain the behavior of online investors. The arguments are drawn from...

Conventional wisdom holds that dependence among geological prospects increases exploration risk. However, dependence also creates the option to truncate exploration if early results are discouraging. We show that the value of this option creates incentives for explorationists to plunge into dependence; i.e., to assemble portfolios of highly correlated exploration prospects. Risk-neutral and ris...

The behavior of institutional investors in money market securities, as exemplified by changes in assets allocated to money market mutual funds, is examined using a unique transaction data set and partial adjustment framework in order to validate fund managers and traders expectations. Individual transaction data is aggregated and separated into a low and high frequency component. The low freque...