We show that retail investors exhibit extrapolative market participation behavior: they tend to increase stock market participation following high market returns and high new participation growth (NPG). When NPG is high, this positive feedback effect is strong, leading to continued overreaction, amplifying momentum, and weakening value effects. Following periods of high (low) NPG, the momentum effect is 1.87% (0.55%) per month, while the value effect is -0.08% (0.68%) per month. Similar patterns also hold for the time-series momentum and value effects. We present a simple model with extrapolative market participation that produces both unconditional momentum and value effects, as well as the conditional variation in momentum and value with NPG.

Using a long-running survey covering both retail and institutional investors, we study the determinants of return expectations across investor types and forecasting horizons. We find that retail and institutional return expectations are more similar than prior literature has documented, showing a strong, positive correlation across all forecasting horizons. For both retail and institutional investors, short-term expectations are consistently extrapolative and procyclical, while forward return expectations are consistently contrarian and countercyclical. This countercyclicality results from a "gradual mispricing correction": although investors perceive rising markets as overpriced, they expect corrections to occur not immediately, but gradually in the longer run. Our findings indicate that perceived mispricing plays a crucial role in shaping long-term forward return expectations, which are positively associated with trading decisions. This intuition is supported by evidence from the text analysis on comments provided by survey participants, where they mention mispricing and related concepts to justify their trading intentions.

When the Federal Reserve raises interest rates, standard macroeconomic models and VARs predict that output, employment, and inflation should fall over the next several quarters. However, monthly-frequency professional macroeconomic forecast data often respond positively to these events, leading to a debate about what could explain these puzzling responses. We bring to bear new high-frequency data on this question from macroeconomic event contracts traded on Kalshi, a CFTC-licensed, U.S.-based event trading exchange and prediction market. These high-frequency event contracts allow us to isolate and estimate the effects of monetary policy and other announcements on the Kalshi market-implied macroeconomic expectations. Our results are consistent with standard transmission channels from monetary policy to the macroeconomy, with little or no role for a ``Fed Information Effect''.