Shleifer, AndreiKwon, Yong Wook2023-06-0220232023-05-092023-05Kwon, Yong Wook. 2023. Essays in Expectations and Asset Prices. Doctoral dissertation, Harvard University Graduate School of Arts and Sciences.30487866https://nrs.harvard.edu/URN-3:HUL.INSTREPOS:37375575How agents react to information and form expectations has become a central question in finance and macroeconomics. On one hand, agents may underreact, which leads to sluggish adjustment of prices and aggregate quantities. On the other hand, agents may overreact, which generates excess volatility, booms, and crashes. What are the underlying determinants of such biases? In particular, under what circumstances would we expect more underreaction or overreaction? This dissertation addresses these questions. The first chapter shows that there is greater overreaction to corporate announcements that are associated with an extreme distribution of fundamentals. The second chapter shows experimentally that there is greater overreaction when agents forecast long-horizon outcomes of transitory processes. The third chapter returns to the financial context, and shows that one can predict the degree of overreaction from the relative composition of active investors.application/pdfenEconomicsFinanceThesis or Dissertation2023-06-020009-0005-0074-4784