Financial literacy and financial crime: A regression discontinuity approach
Financial crime is often treated as a matter of enforcement. People break rules, courts prosecute, and regulators respond. But in reality, financial crime can also [...]
Why Retail Loves SpaceX: A Puzzle with a Long History and Predictable Ending
As I'm writing this, the largest IPO in history is underway. SpaceX, which targeted a $135 IPO price, closed above $160 in its first trading day, making Elon Musk the world's first trillionaire and SpaceX the sixth largest public company in the world. Talk about a rocket ship! While the numbers are astonishing, the story is the same. Retail loves expensive stocks that tell a story.
Extrapolators and contrarians: Forecast bias and individual investor stock trading
Forecast bias is not just about stated beliefs. It shows up directly in individual stock selection.
Second Chance: Life with Less Student Debt
There is a durable, stock-specific momentum component tied to how prices react to firm news around earnings dates. The result is a cleaner, lower-risk way to capture momentum without leaning so heavily on broad factor moves.
Why You Bought GameStop — And Why You Lost Money On It
New academic research explains how retail investors’ own psychology turned the COVID trading boom into a wealth-destroying machine — and what it means for you. [...]
What Drives Investors’ Portfolio Choices? It’s Not What You May Think
Portfolio choices are not driven by preferences alone, they are also shaped by frictions, small costs, inertia, and default options. The result is a subtle but powerful mechanism. What investors hold is not always what they want.
Leader-Follower Dynamics in Shareholder Activism
Activists do not need formal coordination to act together. Instead, they use market signals. Trading itself becomes a way to influence other investors. The result is a subtle but powerful mechanism.
Institutional Investor Attention
Funds that reallocate attention toward macro news when volatility rises perform better. Funds also pay more attention to the stocks they own, and that attention helps them make more valuable position and trading decisions.
Face-to-Face Social Interactions and Local Informational Advantage
Some investment edge still depends on trust, nuance, and soft information that does not travel as well through screens.
Fund Selection When Borrowing Is Restricted
Once borrowing is realistically restricted, the Sharpe ratio can stop lining up with what investors actually care about: utility. This paper argues that in this constrained world, the geometric mean is a better compass.
Exploiting Myopia: The Returns to Long-Term Investing
Markets are often assumed to be efficient across horizons, with prices reflecting fundamentals regardless of who holds the asset or for how long. Recent research challenges this assumption by showing that the investment horizon of shareholders itself shapes prices and future returns.
Retired Investors Should Stop Trading So Much
Retirement creates a sudden jump in leisure time. That should reduce information-processing barriers. The question is: does having more time change how people trade, and does it improve outcomes?
Does regulation actually clean up bad behavior?
This paper explores how FINRA’s efforts to discipline “bad brokers” often lead to regulatory leakage—problematic advisors leaving one firm only to resurface elsewhere.
Institutions’ return expectations across assets and time
This paper shows how return expectations are formed: largely via a common “building-block” model (dividend yields, earnings growth, inflation, P/E changes), and how they vary across asset classes, time periods, and institutions.
How costly are cultural biases? Evidence from FinTech
This paper examines how cultural biases affect high-stakes decisions in a FinTech setting, showing that even when information is the same, the social groups we prefer can lead us into worse outcomes. The result: bias isn’t just unethical, it’s expensive.
Policy news and stock market volatility
This paper builds a new measure of “equity market volatility” using newspaper articles and finds that policy-related news (fiscal, monetary, trade, regulation) explains a large share of volatility spikes.
How New Laws Reshaped Stock Market Participation
Over the past two decades, middle-class Americans have quietly changed how they invest. This paper shows that the share of investable wealth held in stocks has risen—and become systematically linked to age. The driving force? The Pension Protection Act (PPA), which made target date funds (TDFs) the default option in retirement plans.
Do Mutual Fund Flows Really Say What We Think They Say?
For decades, mutual fund flows have been a workhorse variable for understanding investor behavior, market sentiment, and price impact. But what if the way we measure them distorts the story?
Buy and “Hold On for Dear Life”? Think Again!
Today, phrases like “HODL” and “buy the dip” have become rallying cries for equity investors. But is this mindset always correct? Could there come a time when buying dips or holding at all costs turns out to be a mistake? To dig deeper, let’s look at insights from Michael Mauboussin and Dan Callahan’s recent paper, Drawdowns & Recoveries: Base Rates for Bottoms and Bounces, and consider what the evidence tells us about the nature of drawdowns and recoveries.
The Wealth-Insurance Puzzle: Rethinking Risk Coverage and Affluence
A longstanding belief in household finance is that wealthier people should buy less insurance because they can afford to self-insure. But this new research turns that idea on its head. This analysis shows that wealthier U.S. households actually purchase more life and property insurance - not less.