The Misery Index and Future Equity Returns
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 [...]
Leading EMH Economist John Cochrane Suggests that Advisor Fees Might be Justified
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," [...]
This Time is Different? Consider Quantifying Subjective Priors
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 [...]
We Should Increase Trust in Financial Services
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 [...]
Does Crowdsourced Investing Work?
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 [...]
Investing Based on Who you Follow on Social Media? A Real Thing?
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 [...]
A Short Research Library Outlining Why Traditional Stock Picking is Challenging
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 [...]
What Matters to Individual Investors? Evidence from the Horse’s Mouth
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 [...]
Lottery Preferences and Their Relationship with Factor Investing
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, [...]
Math Is Magic: A Weekend Brain Teaser
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 [...]
Do Insider Trades Provide Insights into Future Returns?
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 [...]
Are Earnings Forecasts of Sell-side Analysts Biased?
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 [...]
What Returns Should Investors Expect from Private Equity
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 [...]
Can Anomalies Survive Insider Disagreements
What is the relationship between insider trades and anomalies? Anginer, Hoberg and SeyhunA version of the paper can be found here. Want to read our summaries [...]
Short-Duration Stock Anomaly: Risk or Mispricing
Cash Flow Duration and the Term Structure of Equity Returns Michael WeberA version of the paper can be found here. Want to read our summaries of [...]
Do Investors Focus Too Much on Price-Only Returns?
Reconsidering Returns Samuel M Hartzmark, David H. SolomonA version of this paper can be found hereWant to read our summaries of academic finance papers? Check out [...]
What Induces Children to Save (More)?
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 hereWant to [...]
The Curse of Popularity
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 [...]
The Folly of Hiring Winners and Firing Losers
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 [...]
Compound Your Knowledge Episode 9: Investor Confidence & Issues with Factor Investing
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. [...]