In this study we investigate whether and how the presence of heuristic traders impact capital market outcomes. We extend the Grossman and Stiglitz (1980) model to include a public disclosure and a class of heuristic traders who tie their trades to the public disclosure. We show that heuristic trading encourages a greater fraction of rational traders to become privately informed, and lowers the market risk assessment at the time of the public disclosure. In addition, heuristic trading causes market price to overreact to the public disclosure and increases the total informativeness of price for some model parameter values. It can also result in a lower pre- and post-disclosure cost of capital. We further show that as the quality of public disclosure increases, the wealth advantage of rational traders over heuristic traders decreases. Our findings offer important implications for investors and market regulators.