We identify a new mechanism of opportunistic insider trading linked to attention-driven mispricing. Insiders are more likely to sell their company’s stock during periods of heightened retail attention and more inclined to buy when attention diminishes. The results are particularly pronounced for lottery-type stocks and firms with substantial retail ownership. We demonstrate that our findings—which relate to indicators of mispricing, retail order imbalances, and Robinhood herding episodes—extend to seasoned equity issuances and cannot be solely explained by firm fundamentals. Attention-based insider trading is less likely to result in SEC enforcement actions and persists across different regulatory regimes.

This article proposes an innovative method to assess borrowers’ creditworthiness in consumer credit markets by conducting machine-learning-based analyses on real-time video information that records borrowers’ behavior during the loan application process. We find that the extent of borrowers’ micro-facial expressions of happiness is negatively associated with loan delinquency likelihood, while the degree of fear expressions is positively associated with delinquency risk. These results are consistent with two economic channels relating to the adequacy and uncertainty of borrowers’ future income, drawn from the extant psychology and economics literature. Our study provides important practical implications for fintech lenders and policymakers.

Regulatory punishment in an oligopolistic credit rating market can be costly. Utilizing the Chinese bond market’s unique features, particularly a third-party rating agency, we investigate the regulatory suspension of Dagong Rating by Chinese regulators and its market impact. The punishment initially deters Dagong but diminishes the quality of its ratings post-punishment, altering market competition. Upon returning, Dagong inflates ratings to regain market share, reflecting a “temporary suppression” strategy. Non-Dagong agencies respond by adjusting their ratings; higher power agencies lower ratings, while lower power agencies raise them to stay competitive. Investors remain skeptical of these inflated ratings. Despite Dagong’s suspension, we find no significant differences in bond or stock price reactions between Dagong-rated and non-Dagong-rated firms, suggesting investors did not penalize Dagong-rated entities. This study highlights the complex dynamics and unintended consequences of regulatory interventions in the credit rating market.