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 [...]
Trust and Financial Advice Burke and HungJournal of Pension Economics and Finance, 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 [...]
Extrapolative Beliefs in the Cross Section: What Can We Learn from the Crowds? Zhi Da, Xing Huang, Lawrence J. JinJournal of Financial Economics, 2020A version of this paper can be found hereWant to read our summaries [...]
Do Individual Investors Trade on Investment-related Internet Postings? Manuel Ammannt and Nic SchaubManagement Science, 2020A version of this paper can be found hereWant to read our summaries of academic finance papers? Check out our Academic Research Insight category [...]
There are no "right" answers when it comes to financial markets. There are generally trade-offs to all decisions. For example, stocking picking can be incredible and crush every other investment approach; but stock picking can [...]
What Matters to Individual Investors? Evidence from the Horse's Mouth James Choi and Adriana RobertsonJournal of Finance, 2020A version of this paper can be found hereWant to read our summaries of academic finance papers? Check out [...]
Among the assumptions in the first formal asset pricing model, the CAPM, is that investors are risk-averse, they maximize the expected utility of absolute wealth, and they care only about the mean and variance of [...]
In the course of some research on costs and constraints on momentum strategies, I came across a couple of dueling talks by Wesley Gray and Gary Antonacci, hosted by QuantCon NYC in 2017. During his [...]
The volume of work that has been done on insider transactions is not inconsequential, we've covered a variety of research on the topic in several blog posts just a few of which are here and [...]
There is a substantial body of evidence linking various accounting ratios to expected stock returns. One explanation of the links is that they could be explained by the accounting ratios being associated with systematic sources [...]
The collapse in interest rates, combined with historically high valuations (at least for U.S. stocks), have led many endowments, pension plans (especially those with large unfunded liabilities) and high net worth investors (such as those [...]
What is the relationship between insider trades and anomalies? Anginer, Hoberg and Seyhun A version of the paper can be found here. Want to read our summaries of academic finance papers? Check out our Academic Research [...]
Cash Flow Duration and the Term Structure of Equity Returns Michael Weber A version of the paper can be found here. Want to read our summaries of academic finance papers? Check out our Academic Research Insight category. What [...]
Reconsidering Returns Samuel M Hartzmark, David H. Solomon A version of this paper can be found here Want to read our summaries of academic finance papers? Check out our Academic Research Insight category. What are the Research Questions? [...]
What Induces Children to Save (More)? Moritz Lukas (University of Hamburg) and Markus Nöth (University of Hamburg) A version of this paper can be found here Want to read our summaries of academic finance papers? Check [...]
We can define popularity as the condition of being admired, sought after, well-known, and/or accepted. One would think popularity is a good thing. However, when it comes to investing, the research shows that along with [...]
One of the mistakes that prevent investors from achieving their goals is that when it comes to evaluating investments and investment strategies most think that three years is a long time, five years a very [...]
In this week's post, we discuss two posts. The first post, written by Elisabetta, examines a new method attempting to directly measure aggregate investor overconfidence. The second post, written by Larry Swedroe, examines issues that [...]
