Good news, false expectations? How people assess potential returns in the stock market

A study involving the Cluster of Excellence ECONtribute at the Universities of Bonn and Cologne demonstrates that not only retail investors but also financial professionals often assess potential stock market returns differently from what standard financial economics models predict. This is due to differing ideas about how company news affects future stock returns. The study, titled "Mental Models of the Stock Market," was published in the Quarterly Journal of Economics.