I provide a synthesis of the Behavioural finance literature over the past two decades. I review
the literature in three parts, namely, (i) empirical and theoretical analyses of patterns in the …

We propose a theory of securities market under‐ and overreactions based on two well‐known
psychological biases: investor overconfidence about the precision of private information; …

A model of a noncompetitive speculative market is analyzed in which privately informed
traders and market makers are risk averse. Market liquidity is found to be nonmonotonic in the …

Traditionally and understandably, the microscope of market microstructure has focused on
attributes of single assets. Little theoretical attention and virtually no empirical work has been …

Given the evidence that the level of liquidity affects asset returns, a reasonable hypothesis
is that the second moment of liquidity should be positively related to asset returns, provided …

I review the recent literature on cross‐sectional predictors of stock returns. Predictive
variables used emanate from informal arguments, alternative tests of risk‐return models, …

We propose a theory based on investor overconfidence and biased self-attribution to explain
several of the securities returns patterns that seem anomalous from the perspective of …

Models of price formation in securities markets suggest that privately informed investors
create significant illiquidity costs for uninformed investors, implying that the required rates of …

We examine the relation between stock returns, measures of risk, and several non-risk security
characteristics, including the book-to-market ratio, firm size, the stock price, the dividend …

Previous studies of liquidity span short time periods and focus on the individual security. In
contrast, we study aggregate market spreads, depths, and trading activity for US equities over …