Behavioral finance studies the application of psychology to finance, with a focus on individual-level cognitive biases. I describe here the sources of judgment and decision biases, how they affect trading and market prices, the role of arbitrage and flows of wealth between more rational and less rational investors, how firms exploit inefficient prices and incite misvaluation, and the effects of managerial judgment biases. There is need for more theory and testing of the effects of feelings on financial decisions and aggregate outcomes. Especially, the time has come to move beyond behavioral finance to social finance, which studies the structure of social interactions, how financial ideas spread and evolve, and how social processes affect financial outcomes.

ABSTRACT We provide an empirically motivated study to

The accruals anomaly, documented by Sloan (1996), has been among the most actively scrutinized topics in accounting research over the past decade. Sloan (1996) shows that a strategy long in firms with the most negative accruals and short in firms with the most positive accruals consistently generates economically significant hedge returns. Sloan attri-

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