Using a novel measure of industry exposure to government spending, we show predictable variation in cash flows and stock returns over political cycles. During Democratic presidencies, firms with high government exposure experience higher cash flows and stock returns, while the opposite pattern...

Motivated by psychological evidence on limited investor attention and anchoring, we propose two proxies for the degree to which traders under- and overreact to news, namely, the nearness to the Dow 52-week high and the nearness to the Dow historical high, respectively. We find that nearness to...