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Annual Conference

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Investment Finance, Senior Fellows/Fellows

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May 2023

Financial Intermediaries vs. Capital Allocation: The Forgotten Role of Mutual Funds

Hong ZHANG, Massimo MASSA, Yanbo WANG
Recent evidence challenges the allocational efficiency of firms (in allocating capital to more productive sectors). We investigate whether financial intermediaries can help achieve better allocation. We find domestic mutual funds exhibit significant allocational efficiency in their equity investment...
Keywords: Allocational efficiency, Mutual Fund Investment, capital markets
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Annual Conference

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Investment Finance

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May 2023

Emotional Safety Net Against Financial Distress

Da KE
Does emotional support matter for financial outcomes? Using microdata from U.S. and Australian household surveys, I document that individuals who lack emotional support are more likely to experience financial hardship. This relationship is not confounded by other forms of support—such as financial...
Keywords: emotional support, financial distress, social networks
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Annual Conference

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Investment Finance, Senior Fellows/Fellows

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May 2023

Long-term Earnings Forecasts, Managerial Distortion, and Stock Returns

Massimo MASSA, Allaudeen HAMEED, Zhenghui NI
We explain stock mispricing linked to long-term expectations of earnings growth in terms of managerial manipulation in high-growth conglomerates. Manipulation does not affect analysts’ forecasts of conglomerate earnings, which are more accurate relative to pseudo-conglomerates. The combined effect...
Keywords: overreaction, analyst forecasts, return predictability, earnings predictability, managerial manipula
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Annual Conference

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Investment Finance, Senior Fellows/Fellows

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May 2023

Portfolio Rebalancing and Consumption Response of Households to Monetary Policy Shocks

Sumit AGARWAL, Pulak GHOSH, Changcheng SONG, Yeow Hwee CHUA
Using micro-level administrative data from India, we examine the portfolio rebalancing and consumption response of households to changes in interest rate. By exploiting variation in the timing of expiry of term deposits, we find that when interest rate falls, households rebalance their portfolio fro...
Keywords: Monetary Policy, Household Finance, Portfolio Rebalancing, Consumption, Savings, Liquidity
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Annual Conference

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Investment Finance

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May 2023

Investor Memory and Biased Beliefs: Evidence from the Field

Hongjun YAN, Hongqi LIU , Cameron PENG, Zhengyang JIANG
We survey a large representative sample of retail investors to elicit their memories of stock market investment and return expectations. We then merge the survey data with administrative data of transactions to test a model in which investors form expectations by selectively recalling past experienc...
Keywords: investor belief, memory, survey, extrapolation
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