Why do academic researchers avoid behavioral finance?
Charlie Munger, Warren Buffett's right-hand-man and Vice Chairman of Berkshire Hathaway, has said the following regarding behavioral economics: How could economics not be behavioral? If it [...]
Has the Value Investing Pain Train Ended?
Last year we highlighted what we deemed the "value investing pain train." In 2015, cheap high-quality stocks started getting crushed by expensive junk stocks. Here is a [...]
Replicating Private Equity: the Impact of Return Smoothing
Having spent what seems like a lifetime in the financial industry at this point, I've always had this nagging suspicion about private equity (PE): private equity [...]
Predicting Anomalies with politics, weather, global warming, sunspots, and the stars
We've discussed the use of predictive regressions in the past. Here is an article to learn a bit more about the technique. And while the [...]
Chasing Returns and Avoiding “Spaghetti against the Wall Fund Companies”
Psychology research suggests that when we make predictions, we suffer from “representative bias,” mistakenly overweight observations that fit a particular narrative, and fail to consider base rate [...]
Warnings: Savers should NOT get excited if the Fed Raises Rates
The Deposits Channel of Monetary Policy Drechsler, Savov and Schnabl A version of the paper can be found here. Want a summary of academic papers with [...]
Shocking: Your Experience in the Uterus May Influence Your Investment Decisions!
The Fetal Origins Hypothesis in Finance: Prenatal Environment, the Gender Gap, and Investor Behavior Cronqvist, Previtero et al. A version of the paper can be [...]
Dual Momentum on Individual Stocks. Wow.
Hot off the press and haven't had time to reverse engineer and verify, but this is pretty interesting stuff at first glance. The Enduring Effect [...]
Media Coverage and Stock Returns
Ninety Years of Media Coverage and the Cross-Section of Stock Returns Hillert and Ungeheuer A version of the paper can be found here. Want a summary [...]
Can A Brutal Stock Market Make You Physically Sick?
Worrying About the Stock Market: Evidence from the Hospital Admissions Engelberg and Parsons A version of the paper can be found here. Want a summary [...]
Loosening Short Sale Constraints Makes Markets More Efficient
The Causal Effect of Limits to Arbitrage on Asset Pricing Anomalies Chu, Hirshleifer and Ma A version of the paper can be found here. Want [...]
Even God would get fired as an Active Investor
Perfect foresight has great returns, but gut-wrenching drawdowns. In other words, an active investor who was clairvoyant (i.e. "God"),[ref]We mean no offense by the use [...]
The most concise explanation of behavioral finance I’ve ever seen
One of the most overused-- and misunderstood -- terms I've seen used by finance practitioners is "behavioral finance." Many professionals consider themselves to be "behavioral [...]
How Does Analyst Optimism Affect Momentum Strategies?
Analyst Optimism and Stock Price Momentum Li, Lockwood and et al. A version of the paper can be found here. Want a summary of academic papers [...]
Following “Opportunistic insiders” Earns over 1% Monthly Alpha…
Opportunism as a Managerial Trait: Predicting Insider Trading Profits and Misconduct Ali and Hirshleifer A version of the paper can be found here. Want a summary [...]
Is Price Momentum a Brother From Another Mother?
Fundamentally, Momentum is Fundamental Momentum Robert Novy-Marx A version of the paper can be found here. Want a summary of academic papers with alpha? Check out [...]
Money Doctors: Will You Trust Them in a Crisis?
Do you trust your doctor? If you're like most people, chances are good that you do. And why not? What do you know about medicine [...]
Value Investing: Accruals, Cash Flows, and Operating Profitability
Accruals, Cash Flows, and Operating Profitability in the Cross Section of Stock Returns Ball, Gerakos, Linnainmaa and Nikolaev A version of the paper can be [...]
Does Science Advance One Funeral at a Time?
A really interesting paper hit the NBER wires recently. The central argument of the paper is that "rock star" thought leaders dominate a field, but [...]
Interest Rates, Tax-Selling, and Stock Return Seasonality
Stock prices under pressure: How tax and interest rates drive seasonal variation in expected returns Kang, Pekkala, and et al. A version of the paper [...]