Download or read book Investor Overreaction, Cross-Sectional Dispersion of Firm Valuations, and Expected Stock Returns written by Danling Jiang and published by . This book was released on 2014 with total page 67 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper develops the theoretical predictions that when investor overreaction to market-wide information is larger, firm valuations in the cross-section become more dispersed, and stocks on average earn lower expected returns. Consistent with the model prediction, I find that my measure of firm valuation dispersion measure is a negative predictor of subsequent aggregate returns. The dispersion-return relation is most pronounced among firms that have highly subjective valuations and significant limits of arbitrage.