Senior Fellows/Fellows

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Senior Fellows/Fellows

Moonshots, Investment Booms, and Selection Bias in the Transmission of Cultural Traits

David HIRSHLEIFER , Joshua PLOTKIN
Biased information about the payoffs received by others can drive innovation, risk-taking, and investment booms. We study this cultural phenomenon using a model based on two premises. The first is a tendency for large successes, and the actions that lead to them, to be more salient to onlookers than...
Keywords: Cultural Evolution, Evolutionary Finance, Biased Censorship, Irrational Behavior, Price Equation, Mutation Pressure
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Senior Fellows/Fellows

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Senior Fellows/Fellows

Social Finance: Cultural Evolution, Transmission Bias and Market Dynamics

David HIRSHLEIFER , Erol AKCAY
The thoughts and behaviors of financial market participants depend upon adopted cultural traits, including information signals, beliefs, strategies, and folk economic models. Financial traits compete to survive in the human population, and are modified in the process of being transmitted from one ag...
Keywords: social evolution, cultural evolution, financial markets, social economics, social finance, behavioral economics, behavioral finance, social learning, social influence, social transmission bias
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Senior Fellows/Fellows

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Senior Fellows/Fellows

Social Contagion and the Survival of Diverse Investment Styles

David HIRSHLEIFER , Andrew W. LO, Ruixun ZHANG
We examine the contagion of investment ideas in a multiperiod setting in which investors are more likely to transmit their ideas to other investors after experiencing higher payoffs in one of two investment styles with different return distributions. We show that heterogeneous investment styles are ...
Keywords: Contagion, Investment Styles, Investor Behavior, Investor Psychology, Adaptive Markets
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Senior Fellows/Fellows

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Senior Fellows/Fellows

Do Sell-Side Analysts Say "Buy" While Whispering "Sell"?

David HIRSHLEIFER , Yushui SHI, Weili WU
We study how equity analysts disclose different information to the public versus to fund managers to whom they are connected. We examine say-buy/whisper-sell behavior wherein analysts issue optimistic recommendations to attract retail investors while providing more accurate information to fund manag...
Keywords: Analyst recommendations, Mutual fund, Information Transmission
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Senior Fellows/Fellows

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Senior Fellows/Fellows

The UMO (Undervalued Minus Overvalued) Factor

David HIRSHLEIFER , Danling JIANG
This document provides an overview of the UMO factor. It describes its motivation, construction, and how to obtain it and use it. Behavioral theories suggest that investor misperceptions and market mispricing will be correlated across firms. The UMO factor uses equity and debt financing to identify ...
Keywords: Misvaluation Factor, New Issues, Repurchases, External Financing, Return Predictability
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