Research Watch: Investor Sentiment, Liquidity, and Stock Shocks

As most readers will have gleaned by now, I keep a fairly close watch on the finance research literature. I often highlight interesting pieces, but there are often others worth scanning that I don’t link to. Beginning today, I’ll start highlighting some of those, and this edition mostly comes from the latest crop of papers at NBER:

  • Exchange rate anomalies in the forward discount of currencies (Bacchetta/Wincoop)
  • The overall effect of unexpected financial shocks is highly dependent on return rates (Guerrieri/Lorenzoni)
  • Younger, unprofitable, and non-dividend-paying stocks — in other words, tech stocks — are more likely to be sensitive to waves of investor sentiment (Baker/Wurgler)