We provide evidence that dividend-paying stocks are less exposed to return extrapolation than non-dividend-paying stocks. In particular, social media sentiment and analyst price targets of dividend-paying stocks are significantly less sensitive to past returns. Our findings indicate that this difference stems from price changes playing a larger role in extrapolation and dividends diverting attention away from price changes for dividend-paying stocks. Consistent with models of return extrapolation, dividend-paying stocks earn lower momentum and long-term reversal returns. The value premium, however, is similar among both groups. Collectively, our findings suggest that return extrapolation is an important source of some anomaly returns.

To improve audit effectiveness, public accounting firms have organized their practices to include hierarchical review by teams organized along industry lines. We examine how industry specialized auditor teams detect errors, using a sophisticated experimental design. Our analysis of nominal teams created from seniors and managers working individually shows that seniors add value to the team by detecting more mechanical errors while managers detect more conceptual errors. Working within specialization, managers and seniors both contribute in a nonredundant way to the team’s overall effectiveness. We also find that the nominal teams outperform real teams in the detection of mechanical but not conceptual errors. These results only hold when the auditors work within in their industry specialization. Out of specialization the auditors are not effective at detecting errors, and real teams perform below the nominal team benchmark in the detection of both mechanical and conceptual errors.