Research seminars

Real Anomalies

Finance

Speaker: Jules Van Binsbergen
Wharton - University of Pennsylvania

2 March 2017 - T004 - From 2:00 pm to 3:15 pm


We examine the importance of asset pricing anomalies (alphas) for the real economy. To this end, we develop a novel lumpy investment model that features such anomalies and yields closed-from solutions for the joint cross-sectional distribution of firm dynamics. Our findings indicate that informational inefficiencies measured by cross-sectional alphas can cause material real inefficiencies, raising the possibility that agents that help eliminate anomalies can provide significant value added to the economy. The framework reveals that alphas alone are poor indicators of real distortions, and that efficiency losses crucially depend on the persistence of alpha, the amount of mispriced capital, and the Tobin's q of firms that are affected.

Finance

Speaker: Matthieu Bouvard
Desautels Faculty of Management

14 June 2018 - From 2:00 pm to 3:15 pm


Finance

Speaker: Mikhail Simutin
Rotman School of Management

7 June 2018 - From 10:00 am to 12:30 pm


Disclosure, Competition, and Learning from Asset Prices

Finance

Speaker: Liyan Yang
Rotman School of Management

31 May 2018 - T208 - From 2:00 pm to 3:15 pm

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This paper studies the classic information-sharing problem in a duopoly setting in which firms learn information from a financial market. By disclosing information, a firm incurs a proprietary cost of losing competitive advantage to its rival firm but benefits from learning from a more informative asset market. Firms' disclosure decisions can exhibit strategic complementarity, which is strong enough to support both a disclosure equilibrium and a nondisclosure equilibrium. Allowing minimal learning from asset prices dramatically changes firms' disclosure behaviors: without learning from prices, firms do not disclose at all; but with minimal learning from prices, firms can almost fully disclose their information. Learning from asset prices benefits firms, consumers, and liquidity traders, but harms financial speculators.

Alpha Decay*

Finance

Speaker: Anton Lines
Columbia Business School

24 May 2018 - T020 - From 2:00 pm to 3:15 pm

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Using a novel sample of professional asset managers, we document positive incremental alpha on newly purchased stocks that decays over twelve months. While managers are successful forecasters at these short-to-medium horizons, their average holding period is substantially longer (2.2 years). Both slow alpha decay and the horizon mismatch can be explained by strategic trading behavior. Managers accumulate positions gradually and unwind gradually once the alpha has run out; they trade more aggressively when the number of competitors and/or correlation among information signals is high, and do not increase trade size after unexpected capital flows. Alphas are lower when competition/correlation increases.

What is the Expected Return on a Stock?

Finance

Speaker: Ian Martin
LSE

17 May 2018 - From 2:00 pm to 3:15 pm


We derive a formula that expresses the expected return on a stock in terms of the risk-neutral variance of the market and the stock’s excess risk-neutral variance relative to the average stock. These quantities can be computed fromindex and stock option prices; the formula has no free parameters. We run panel regressions of realized stock returns onto risk-neutral variances, and find that the theory performs well at 6-month, 1-year, and 2-year forecasting horizons. The formula drives out beta, size, book-to-market and momentum, and outperforms a range of competitors in forecasting stock returns out of sample. Our results suggest that there is considerably more variation in expected returns, both over time and across stocks, than has previously been acknowledged.


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