I use industry-level returns in foreign markets to examine the hypothesis that value-relevant foreign information slowly diffuses into the stock prices of U.S. multinational firms. A trading strategy that exploits foreign information generates abnormal returns of 0.8% monthly. I find that the market responds more slowly in periods with lower media coverage of foreign news and to information from more linguistically and culturally distant countries. These results suggest that both investors' inattention and lack of understanding of foreign information slow the incorporation of new information into prices. I further separate these two mechanisms by examining market responses to earnings surprises.

This paper examines the effect of prior investment experience in specific industries on subsequent investment decisions. Using households’ trading records from a large discount broker between 1991 and 1996, I find that prior success in a given industry increases the likelihood of subsequent purchases in the same industry. The effect is stronger for more recent experiences and for less sophisticated or diversified investors, and it is not wealth enhancing. The results suggest investors categorize industries at a highly resolved level, finer than the Fama–French ten-industry classification. Similar effects are also apparent for size- and value-based categories but at smaller magnitudes.

I use industry-level returns in foreign markets to examine the hypothesis that value-relevant foreign information slowly diffuses into the stock prices of U.S. multinational firms. A trading strategy that exploits foreign information generates abnormal returns of 0.8% monthly. I find that the market responds more slowly in periods with lower media coverage of foreign news and to information from more linguistically and culturally distant countries. These results suggest that both investors' inattention and lack of understanding of foreign information slow the incorporation of new information into prices. I further separate these two mechanisms by examining market responses to earnings surprises.

When assessing a fund manager's skill, sophisticated investors will consider all factors (priced and unpriced) that explain cross-sectional variation in fund performance. We investigate which factors investors attend to by analyzing mutual fund flows as a function of recent returns decomposed into alpha and factor-related returns. Surprisingly, investors attend most to market risk (beta) when evaluating funds and treat returns attributable to size, value, momentum, and industry factors as alpha. Using proxies for investor sophistication (wealth, distribution channels, and periods of high investor sentiment), we find that more sophisticated investors use more sophisticated benchmarks when evaluating fund performance.

We examine the role of race and ethnicity in the mutual fund context at two distinct levels. At the fund manager level, we document a co-racial tilt—funds managed by minority-dominant (White-dominant) teams allocate larger portfolio weights to minority-led (White-led) firms. This tilt is not associated with superior performance. It diminishes as fund managers gain experience, suggesting the presence of inaccurate statistical discrimination. At the investor level, we find that minority-dominant funds are penalized similarly to White-dominant funds for poor performance but are not rewarded as much for superior performance. Overall, our results uncover race-related investment choices at both levels.

We use the New York Fed Consumer Credit Panel data set to empirically examine how past house price growth influences the timing of homeownership. We find that the median individual in metropolitan areas with the highest quartile house price growth becomes a homeowner 5 years earlier than that in areas with the lowest quartile house price growth. The result is consistent with a life cycle housing-demand model in which high past price growth increases expectations of future price growth thus accelerating home purchases at young ages. We show that extrapolative expectations formed by homebuyers are a necessary channel to explain the result.

When assessing a fund manager's skill, sophisticated investors will consider all factors (priced and unpriced) that explain cross-sectional variation in fund performance. We investigate which factors investors attend to by analyzing mutual fund flows as a function of recent returns decomposed into alpha and factor-related returns. Surprisingly, investors attend most to market risk (beta) when evaluating funds and treat returns attributable to size, value, momentum, and industry factors as alpha. Using proxies for investor sophistication (wealth, distribution channels, and periods of high investor sentiment), we find that more sophisticated investors use more sophisticated benchmarks when evaluating fund performance.

Using novel data from a crowdsourcing platform for ranking stocks, we investigate how investors form expectations about stock returns over the next week. We find that investors extrapolate from stocks’ recent past returns, with more weight on more recent returns, especially when recent returns are negative, salient, or from a dispersed cross-section. Such extrapolative beliefs are stronger among nonprofessionals and large stocks. Moreover, consensus rankings negatively predict returns over the next week, more so among stocks with low institutional ownership and a high degree of extrapolation. A trading strategy that sorts stocks on investor beliefs generates an economically significant profit.

We examine the role of first impressions in angel investor decision-making. Video stills of entrepreneurs pitching on the Shark Tank show and in Startup Battlefield competitions yield six measures of first impressions of entrepreneurs’ facial traits and two principal components: one that captures general ability and the other that contrasts charm and managerial ability. We find positive associations between both components and the likelihood of entrepreneurs receiving an investment offer or winning a competition round. Post-event business outcome analyses reveal that investors internalize entrepreneurs’ general ability rationally but exhibit irrational tendencies when internalizing entrepreneurs’ charm and managerial ability. Investment experience mitigates investors’ irrational use of charm and managerial ability cues.

We study the influence of financial innovation by fintech brokerages on individual investors’ trading and stock prices. Using data from Robinhood, we find that Robinhood investors engage in more attention‐induced trading than other retail investors. For example, Robinhood outages disproportionately reduce trading in high‐attention stocks. While this evidence is consistent with Robinhood attracting relatively inexperienced investors, we show that it is also driven in part by the app's unique features. Consistent with models of attention‐induced trading, intense buying by Robinhood users forecasts negative returns. Average 20‐day abnormal returns are −4.7% for the top stocks purchased each day.