The phenomenon of price underreaction, alongside the equity premium puzzle and the small-firm effect, represents one of the greatest challenges in rationally explaining stock valuation in the capital market. In the literature, this phenomenon is frequently cited as an argument against the efficient processing of information and the rationality of investors. Liang Ding presents a rational explanation for price underreaction by integrating insights from market microstructure theory with findings from the discussion on trading and price formation under heterogeneous expectations. Using an equilibrium model, the author demonstrates that due to trading frictions, a systematic price underreaction can be observed in the market, even when investors interpret new information correctly on average.