Economics Insights @ CBS

Using proprietary data on millions of trades by retail investors, we provide the first large-scale evidence that retail short selling predicts negative stock returns. A portfolio that mimics weekly retail shorting earns an annualized risk-adjusted return of 9%. The predictive ability of retail short selling lasts for one year and is not subsumed by institutional short selling. In contrast to institutional shorting, retail shorting best predicts returns in small stocks and those that are heavily bought by other retail investors.

We propose the anticipation-event-recall (AER) model. Set in a continuous time frame, the AER model formally links the three components of total utility (i.e., utility from anticipation, event utility, and utility from recall). The AER model predicts the temporal profiles of instant utility experienced before, during, and after a given event. Total utility is calculated as the integral of instant utility. The model builds on the psychological elements of conceptual consumption, adaptation, and time distance.

Rivalry is prevalent across many competitive environments and differs in important ways from non-rival competition. Here, we draw upon research on relational schemas and automatic goals to explore whether mere exposure to or recall of a rival can be sufficient to increase individuals' Machiavellianism and unethical behavior, even in contexts where their rivals are not present.

The present research considered what leads perceivers to evaluate someone as a good or poor judge of people. In general, we found a substantial role for agreement: perceivers evaluated another person as a good judge when he or she agreed with their perception of someone's characteristics. Importantly, the effect of agreement depended on who this " someone" was. We found that perceivers' evaluation of another individual as a good judge was more heavily shaped by agreement about their own characteristics than by agreement about a third-party target's characteristics.

We consider the implications for optimal fiscal policy when taxes are non-distortionary and households are heterogeneous and borrowing constrained. The main result is that optimal policy keeps some households borrowing constrained in order to reduce interest rates on government debt.