Disagreement and the Stock Market
Over the last twenty years, the field of behavioral finance has grown from a
startup operation into a mature enterprise, with well-developed bodies of both theory and
empirical evidence. On the empirical side, the benchmark null hypothesis is that one
should not be able to forecast a stock’s return with anything other than measures of its
riskiness, such as its beta; this hypothesis embodies the familiar idea that any other form
of predictability would represent a profitable trading rule and hence a free lunch to
investors. Yet in a striking rejection of this null, a large catalog...
