Time-Varying Drivers of Stock Prices
This paper examines the time-varying roles of subjective expectations in driving stock price and return variations.
Financial Knowledge in Europe: Women Lag Men in their financial Literacy
This paper examines the level of financial literacy across the 27 EU member states, using data from the 2023 Flash Eurobarometer 525 survey.
Academic Anomalies Formed After Information Events
The hurdles to adding alpha for active managers are getting higher—investment practitioners make use of it as soon as or shortly after it is available.
Reading the WSJ May Make You a Better Economist
How can textual analysis of business news, specifically The Wall Street Journal (WSJ), be used to measure the state of the economy?
Analysts set price targets using trailing P/E ratios
Trailing twelve-month P/E ratios account for 91% of the variation in analysts’ price targets. We construct a new kind of asset-pricing model around this fact and show that it explains the market response to earnings surprises.
Investors trade Cryptos and Trad-Fi Differently
Retail traders are contrarian in stocks and gold, yet the same traders follow a momentum-like strategy in cryptocurrencies. The differences are not explained by individual characteristics, investor composition, inattention, differences in fees, or preference for lottery-like assets. We conjecture that retail investors have a model where cryptocurrency price changes affect the likelihood of future widespread adoption, which leads them to further update their price expectations in the same direction.
High school financial education courses in the United States
This article provides detailed insights into how high school financial education policies are implemented at the local level.
Overvalued or New Paradigm?
Without question the topic of greatest debate among investors, including investment professionals, and financial economists, is whether or not the market, and the technology sector in particular, is overvalued. There are two very strong conflicting views regarding not only the current valuation of technology stocks, but also the valuation of the entire asset class of large-cap growth stocks. One side, I’ll call the “new paradigm” or “it’s different this time” school. The other side, I’ll call “the been there, done that” school. Its theme is those that don’t learn from the past are doomed to repeat the same mistakes. No two sides could have more different viewpoints. To understand each side, let’s imagine a dialogue between the two schools.
The Value of WallStreetBets Investment Research Recommendations
Wallstreetbets has become an increasingly prominent source of investment research. Do their recommendations have value?
The Negative Impact of Crowding on Active Fund Performance
The shrinking pool of public companies across which active funds can diversify their holdings, increases the risk of crowding, which the research we reviewed shows negatively impacts performance. That provides yet another reason for investors to choose to avoid playing the loser’s game of active management.
Crypto owners know Crypto…but not finance
We find that a significant share of Canadian Bitcoin owners have low crypto knowledge and low financial literacy. We also find gender differences in crypto literacy among Bitcoin owners, with female owners scoring lower in Bitcoin knowledge than male owners.
How do macroeconomic announcements impact household spending?
What are the primary factors contributing to the steep and persistent decline in U.S. consumption growth during the Great Financial Crisis of 2008-2009?
When Shorts Don’t Short
Low short positions come from positive public news, while negative news can drive average short or extremely high short positions
How to Track Retail Investor Activity in TAQ
This paper explores the effectiveness of the BJZZ algorithm, developed by Boehmer, Jones, Zhang, and Zhang (2021), in identifying and signing retail trades executed off exchanges with subpenny price improvements.
Financial literacy in Canada: Not Bad, Eh?
This study is important because it provides valuable insights into the current state of financial literacy in Canada, its relationship to retirement planning, and the factors that influence financial literacy outcomes.
Does Diversity add value to asset management?
The research literature on diversity in asset management, while promising, is limited with respect to the breadth of the evidence produced to date. We don't really understand the broad-based benefits of diversity nor how diversity delivers value in asset management. How does it really work? Is it the university, the college major, gender, race, the work experience? That is where this study comes into play. The authors propose a unifying concept called homophily to analyze the impact of diversity in asset management using hedge funds as their laboratory. Sociology describes homophily as groups of people that share common characteristics such as beliefs, values, education, and so on. In a team setting those characteristics make communication and relationship formation easier. Further, a large body of research in sociology specifically documents the presence of homophily with respect to education, occupation, gender, and race. Luckily, management teams within hedge funds can be characterized by just those dimensions.
Social Media: The Value of Seeking Alpha’s Recommendations
The finding that the recommendations from SA articles resulted in statistically significant risk-adjusted alphas (returns unexplained by conventional academic models using factors such as the market, size, value, momentum, profitability, and quality for equity portfolios) is surprising given that the empirical evidence shows how difficult it is for institutional investors such as mutual funds to show outperformance beyond the randomly expected (as can be seen in the annual SPIVA Scorecards) because of market efficiency.
What Changes after Women Enter Top Management Teams?
How do female appointments to top management teams (TMTs) affect a firm's approach to knowledge-related strategic renewal?
Social Media, Analyst Behavior and Market Efficiency
Hibbert, Kang, Kumar and Mishra provided us with yet another explanation: social media is providing analysts with information that reduces their forecasting errors. The result has been an increase in market efficiency, leading to a reduction in the PEAD anomaly. The bottom line is that the ability to generate alpha continues to be under assault—trying to outperform the market by stock selection is becoming even more of a loser’s game.
How investors form beliefs and make decisions
The implications of wishful thinking and subjective belief choice for endogenous disagreement among investors are substantial and can vary with economic conditions: