This study focuses on the market reaction to information transfers from economically linked customers. I examine whether investors have limited attention with respect to the information contained in customer earnings announcements for suppliers. Using 1083 unique customer–supplier relationships for the period 1983–2011, I find that the cumulative abnormal returns of a supplier surrounding and f...

This study focuses on the market reaction to information transfers from economically linked customers. In particular, I examine whether investors have limited attention with respect to the information contained in customer earnings announcements for suppliers. Using 1,083 unique customer-supplier relationships for the period 1983–2011, I find that the cumulative abnormal returns of a supplier s...

We hypothesize that owing to limited investor attention and skepticism of complexity, innovative diversity (ID) of a firm's patent portfolio will be undervalued. ID strongly predicts stock returns after controlling for firm characteristics and risk. High ID portfolios provide Carhart alphas of 56-81 basis points per month and stronger and less volatile operating performance. The Diversified Min...

Motivated by psychological evidence that attention is a scarce cognitive resource, we model investors’ attention allocation in learning and study the effects of this on asset-price dynamics. We show that limited investor attention leads to category-learning behavior, i.e., investors tend to process more market and sector-wide information than firm-specific information. This endogenous structure...

We review evidence about how psychological biases affect investor behavior and prices. Systematic mispricing probably causes substantial resource misallocation. We argue that limited attention and overconfidence cause investor credulity about the strategic incentives of informed market participants. However, individuals as political participants remain subject to the biases and self-interest th...