The authors hypothesize that impression management consideration can also significantly determine investors’ conversations. This, in turn, can cause investors to inadvertently propagate noise with wide-ranging implications for the quality of investors’ investment decisions and asset prices.
Traditional finance theory suggests that stocks prices always reflect their fair market values based on publicly available information. Or in academic parlance, the "semi-strong" form efficient markets hypothesis serves as the null. What are the implications of this hypothesis? Well, the hypothesis suggests that the only reason a stock price will move is due to a shift in fundamentals (either through a change in expected cash flows or via the discount rate). But what about supply and demand shifts?
“Employees are our greatest asset” is a phrase often heard from companies. However, due to accounting rules requiring that most expenditures related to employees be treated as costs and expensed as incurred, the value of employees is an intangible asset that does not appear on any balance sheet. That leaves the interesting question of whether employee satisfaction provides information on future returns.
The literature shows that where we come from affects both how we perceive other people as well as how we are perceived by others. These perceptions can also affect economic behavior. In this study, the author analyzes the role of cultural biases in analysts’ stock recommendations in Europe.
Empowering investors through education is a foundational tenet of our firm and a big reason why we write these posts. The article we cover here is a meta-analysis 76 randomized studies on the impacts and design of financial education, a topic we've hit on before. It' almost cliche now to hear parents and educators demand schools take the initiative to make financial education a high priority. However, it's reasonable to ask, does financial education even work?
Are individuals just naïve performance chasers, unaware of the financial literature, or are they sophisticated investors? Pretty much.
Do mutual funds create unnecessarily complex disclosures and fee structures to obfuscate weak net performance? Yes.
Can market sentiment be derived from the tunes that your fellow countrymen are listening to? According to the research summarized here you'll find that there is important market information buried in the listening habits of Spotify users.
Today we summarize an investigation into the usefulness of Prospect Theory and Narrow Framing to evaluate whether a new model can help explain 22 prominent market anomalies.
Due to the surprising headline that treasury bills seemingly outperform stocks, practitioners are starting to ask: Should I invest in individual stocks?
Eric Balchunas had a recent tweet that I found fascinating. Eric's tweet merely captures the tip of the iceberg with respect to the current market environment, which certainly feels "bubbly."[ref]But who knows. If my allocations [...]
Momentum, Reversals, and Investor Clientele Andy Chui, Avanidhar Subrahmanyam, and Sheridan TitmanReview of Financial Studies, 2021A version of this paper can be found hereWant to read our summaries of academic finance papers? Check out our Academic Research [...]
Out of Sight No More? The Effect of Fee Disclosures on 401(k) Investment Allocations Kronlund, Pool, Sialm and StefanescuJournal of Financial Economics, 2021A version of this paper can be found hereWant to read our summaries of [...]
Hendrik Bessembinder contributes to the literature on the returns to public equity investment diversification benefits with his study “Wealth Creation in the US Public Stock Markets 1926-2019,” published in the April 2021 issue of The [...]
The rate of communication Huang, Hwang and LouJournal of Financial Economics, 2021A version of this paper can be found hereWant to read our summaries of academic finance papers? Check out our Academic Research Insight category What are the [...]
Impact Investing: Killing Two Birds with One Stone? Caseau and GrolleauFinancial Analyst Journal, 2020A version of this paper can be found hereWant to read our summaries of academic finance papers? Check out our Academic Research Insight category What [...]
People systematically overlook subtractive changes Gabrielle S. Adams, Benjamin A. Converse, Andrew H. Hales & Leidy E. Klotz Nature 592, 258-161A version of this paper can be found hereWant to read our summaries of academic finance papers? Check out our Academic Research [...]
Prospect theory was developed by Daniel Kahneman and Amos Tversky in 1979. The theory starts with the concept of loss aversion—the observation that people react differently between potential losses and potential gains. Thus, people make [...]
Sorry for the clickbait, but Hoover Institute fellow and “Grumpy Economist" John Cochrane's answers to the seemingly benign question, "How should long-term investors form portfolios," is too important to both advisors and academics to overlook. [...]
This time is different. --John Templeton "This time is different," is a sentiment that leads many investors to stray from using data analysis in their investment decision process and more towards discretionary judgment. The logic [...]