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:
How the Stock Market Impacts Investor Mental Health
Studies have found that there is a correlation between stock market downturns and an increase in hospital admissions for mental illness, an increase in domestic violence, deteriorating mental health among retirees, and increased depression rates.
Personality Differences and Investment Decision-Making
This study offers valuable information to provide insights into the underlying mechanisms driving investment behavior. For example, recognizing the impact of Neuroticism on belief formation and risk perception can help explain why some investors exhibit greater aversion to stock market volatility. Similarly, understanding how Openness influences risk preferences can shed light on why certain individuals are more willing to take investment risks than others.
Cut Your Losses and Let Profits Run?
Be careful before acting on what is considered to be conventional wisdom. Make sure it’s supported by empirical evidence. In this case, the evidence makes clear that “cut your losses and let your profits run” should not be conventional wisdom.
Financial Literacy and Financial Resilience: Evidence from Italy
The paper aims to contribute to the literature by providing insights into the current state of financial literacy in Italy, its implications for financial well-being and resilience, and the demographic disparities therein.
Self-Declared Benchmarks and Fund Manager Intent: “Cheating” or Competing?
The paper aims to provide insights into the dynamics of benchmark selection, the effectiveness of Relative Performance Evaluation ( RPE ) incentivization, and the broader implications for fund performance and market competition.
Band of Brothers Attacking Short Sellers: Game Stop for Hedge Funds
Advisors and investors should be aware that fund families that invest systematically have found ways to incorporate the research findings on the limits to arbitrage and the evolving changes we have discussed to improve returns over those of a pure index replication strategy. It seems likely this will become increasingly important, as the markets have become less liquid, increasing the limits to arbitrage and allowing for more overpricing.
The Smart Money Can Buy Stocks, but They Can’t Sell Them
The paper aims to investigate whether experienced institutional portfolio managers (PMs) exhibit behavioral biases in their decision-making processes, specifically focusing on the selling decisions.
Untangling Behavioral Finance and the Psychology of Financial Planning
The article discusses the importance of integrating psychology into the field of financial planning and highlights the need to understand and address the psychological aspects of financial decision-making and client relationships.
Factor Investors: Momentum is Everywhere
The Jegadeesh and Titman (1993) paper on momentum established that an equity trading strategy consisting of buying past winners and selling past losers, reliably produced risk-adjusted excess returns. The Jegadeesh results have been replicated in international markets and across asset classes. As this evidence challenged and contradicted widely accepted notions of weak-form market efficiency, the academic community took notice and started churning out research. As a result, a very large number of academic studies were published on momentum. The article summarized here has conveniently summarized 47 articles deemed as the highest quality and published in either the Journal of Finance, the Review of Financial Studies, or the Journal of Financial Economics, all three considered premier journals in the finance discipline. It is difficult to understate the importance of having a well-curated summary of momentum research. Keep it in your library.
A New Wolf in Town? Pump-and-Dump Manipulation in Cryptocurrency Markets
Cryptocurrency and the various forms of infrastructure are currently in a stage of rapid innovation. If the manipulation embedded in PADs is widespread then the confidence in and integrity of the crypto market will suffer.
Do Short-Term Factor Strategies Survive Transaction Costs?
Short term return anomalies are generally dismissed in the academic literature "because they seemingly do not survive after accounting for market frictions.” In this research, short term “factors” are taken seriously and the authors argue the standard parameters may not apply for short horizons.
Female execs bring more accuracy to analysts’ earnings forecasts
The results of this research extend the literature in a number of areas including: the analyst forecast literature; the literature on behavioral accounting and finance with respect to corporate decision-making all in the context of gender; and the dominant role of the CEO on information transparency.
Do we invest like our family members?
This study adds evidence to the literature of social interaction by confirming empirically that investors acquire investment ideas from their family members.
The Reddit Road to Riches?
No surprise: reddit message boards don't lead to alpha generation.
Game On: Social Networks and Markets
This article studies how investment ideas can propagate through a social network and affect market behavior and prices.
Can We Improve Momentum Factor Investing via Salience Theory?
The contribution of salience theory to the theory of asset pricing turns out to be quite a profitable insight for momentum strategies.
Inside the Minds of Expected Stock Returns
Non-traditional investor preferences play an important role in explaining the cross-section of expected stock returns.
Active Managers are Subject to the Same Biases as Individual Investors
Are active managers victims of the same bias as individual investors? That is the question we’ll explore in this paper.
Pulling the curtain back: what do millionaires invest in?
In this article, we examine the academic research about what millionaires invest in.