Economics Insights @ CBS

This paper tests whether stock market investors appropriately distinguish new and old information about firms. I define the staleness of a news story as its textual similarity to the previous ten stories about the same firm. I find that firms' stock returns respond less to stale news. Even so, a firm's return on the day of stale news negatively predicts its return in the following week. Individual investors trade more aggressively on news when news is stale. The subsequent return reversal is significantly larger in stocks with above-average individual investor trading activity.

Research examining both the organizing and activating effects of testosterone in one-shot bargaining contexts has been vexed by inconsistencies. Some research finds that high-testosterone men are more likely to reject unfair offers in an ultimatum game and exogenous administration of testosterone to men leads to less generous offers. In contrast, other research finds that higher prenatal exposure to testosterone predicts more generous dictator game offers and administering testosterone to women leads to more generous ultimatum game offers.

The etiology of generalized anxiety disorder (GAD), including its high degree of comorbidity with major depressive disorder (MDD), remains a conceptual and clinical challenge. In this article, we discuss the relevance of regulatory focus theory (Higgins, 1997), an increasingly influential theory of self-regulation, for generating and testing hypotheses regarding vulnerability to GAD as well as to GAD/MDD comorbidity. The theory postulates two cognitive/motivational systems for pursuing desired end states: the promotion and prevention systems.

We characterize the optimal mortgage contract in a continuous time setting with stochastic growth in house price and income, costly foreclosure, and a risky borrower who requires incentives to repay his debt. We show that many features of subprime loans can be consistent with properties of the optimal contract and that, when house prices decline, mortgage modification can create value for borrowers and lenders.

Historical studies reveal how organizational markets supplied artifacts that became fashionable because they met not only consumers' cultural tastes, but also their technological preferences. This article calls such artifacts cultural-technological fusions. The digital mode of production tends to generate more types of fashionable fusions, which replace each other at a growing rate, and travel increasingly swiftly across consumers globally.