• Graduate program
    • Why Tinbergen Institute?
    • Program Structure
    • Courses
    • Course Registration
    • Facilities
    • Admissions
    • Recent PhD Placements
  • Research
  • News
  • Events
    • Summer School
      • Behavioral Macro and Complexity
      • Econometrics and Data Science Methods for Business and Economics and Finance
      • Inequalities in Health and Healthcare
      • Introduction in Genome-Wide Data Analysis
      • Research on Productivity, Trade, and Growth
      • Summer School Business Data Science Program
    • Events Calendar
    • Tinbergen Institute Lectures
    • Annual Tinbergen Institute Conference
    • Events Archive
  • Summer School
  • Alumni
  • Times

Hendershott, T., Menkveld, AlbertJ., Praz, R. and Seasholes, M. (2022). Asset Price Dynamics with Limited Attention Review of Financial Studies, 35(2):962--1008.

  • Journal
    Review of Financial Studies

We identify long-lived pricing errors through a model in which inattentive investors arrive stochastically to trade. The model's parameters are structurally estimated using daily NYSE market-maker inventories, retail order flows, and prices. The estimated model fits empirical variances, autocorrelations, and cross-autocorrelations among our three data series from daily to monthly frequencies. Pricing errors for the typical NYSE stock have a standard deviation of 3.2 percentage points and a half-life of 6.2 weeks. These pricing errors account for 9.4$%$, 7.0$%$, and 4.5$%$ of the respective daily, monthly, and quarterly idiosyncratic return variances.