How to Make Money in Markets: Understanding Expectation Errors
A new working paper from Gennaili, Ma, and the one-the-only Andrei Shleifer. Expectations and Investment Using micro data from Duke University quarterly survey of Chief [...]
One Secret to More Creative Thinking? The Effect of Walking
Researchers at Stanford recently conducted a study that found that the physical act of walking improved creative thinking in subjects. We believe creative thinking is an [...]
The “hot hand” in basketball. New evidence!
For years, the "hot hand" in basketball has been declared a "fallacy." To be clear, the "hot hand" argument is that basketball players have streaks, where [...]
Behavioral Finance: Part Behavior, Part Market Frictions
The baseline theory for understanding asset prices is the Efficient Market Hypothesis (the “EMH”), pioneered by Eugene Fama. Of particular interest is semi-strong market efficiency, which [...]
For an Auditor, Intuition Might Matter!
Thinking Fast versus Thinking Slow: The Effect on Auditor Skepticism Wolfe, Christensen and Vandervelde A version of the paper can be found here. Want a summary [...]
Humble Pie Prevents 99.8% Drawdowns
It’s not every day you hear news of a 99.8% drawdown, but it looks like today is one of those days. Owen Li of Canarsie [...]
Frequent Trading + Optimistic Analyst Recommendations = Significant Misvaluations!
Stock Duration, Analysts Recommendations, and Misvaluation Cremers, Pareek and Sautner A version of the paper can be found here. A blog on an older version of [...]
Hard to Fire Yourself; Easy to Fire Your Manager
Looking for Someone to Blame: Delegation, Cognitive Dissonance, and the Disposition Effect Chang, Solomon, Westerfield A version of the paper can be found here. Want a [...]
Stop Paying Attention to Your Brokerage Statements
The Worst, the Best, Ignoring All the Rest: The Rank Effect and Trading Behavior Hartzmark A version of the paper can be found here. Want a [...]
Avoid the Experts: A Lesson in CFO Overconfidence
Managerial Miscalibration Ben-David, Graham and Harvey A version of the paper can be found here. Want a summary of academic papers with alpha? Check out our Academic [...]
Thanksgiving Day NFL Gamblers–Take Notes!
Efficiency and the Disposition Effect in NFL Prediction Markets Hartzmark and Solomon A version of the paper can be found here. Want a summary of academic [...]
Avoid CEOs that Golf like Tiger Woods
FORE! An analysis of CEO shirking Biggerstaff, Cicero and Puckett A version of the paper can be found here. Want a summary of academic papers with [...]
Afraid of Market Risk? Stop. Be Afraid of Bias.
Stock markets have been sucking wind recently. S&P R2K When I listen to the nightly news or indulge in 30 seconds of CNBC during the day, [...]
Behavioral Bias Bingo — The Whimsical Cuteness Effect
"So Cute I Could Eat it Up": Priming Effects of Cute Products on Indulgent Consumption Nenkov and Scott A version of the paper can be [...]
Behavioral Bias Bingo — False-Consensus Bias
I Believe...Why Don't You? To believe your own thought, to believe that what is true for you in your private heart, is true for all [...]
Surprising Facts on Post-Earnings Announcement Drift
Recency Bias and Post-Earnings Announcement Drift Qingzhong Ma, David Whidbee, and Wei Zhang A version of the paper can be found here. Want a summary of [...]
Behavioral Bias Bingo — Availability Heuristic
If you can recall something, you think it's important From 1990 through 2000 there were 1.4 deaths per 10 million passengers on U.S. scheduled airlines. [...]
Behavioral Bias Bingo — Mental Accounting
Mental Accounting and Your Money "Mr. and Mrs. L and Mr. and Mrs. H went on a fishing trip in the northwest and caught some [...]
Behavioral Bias Bingo — The Illusion of Control
The Illusion of Control In most elevators, at least in any built or installed since the early nineties, the door-close button doesn’t work. It is there [...]
Forecasting Bias: From Weather to Wall Street
Providers of forecasts often want to be right, but they also don’t enjoy surprising people on the downside. People don’t like nasty surprises. For instance, [...]