Sexy or Safe: Why do Predicted Stock Issuers Earn Low Returns?

 
 
keynote-banner
 

Predicted stock issuers (PSIs) are firms with expected “high-investment and low-profit” (HILP) profiles that earn unusually low returns. We carefully document important features of PSI firms to provide new insights on the economic mechanism behind the HILP anomaly. Our results show top-PSI firms are cash-strapped and dependent on external financing, have lottery-like payoffs, high volatility, high Beta, and high shorting costs. Over the next two years, top-PSIs earn return-on-assets of -30% per year, report disappointing earnings, and experience strongly-negative analyst forecast revisions. They earn especially low returns in down markets and are nine times more likely to delist for performance reasons. We conclude that HILP firms earn low returns not because they are safer, but because they are more salient (i.e., sexier) to investors and are thus overpriced.

25
May
2017
Thursday
 
12:15pm
12:30pm
Academic Luncheon Keynote

By: Professor Charles Lee
Moghadam Family Professor of Management and Professor of Accounting, Stanford University
Co-Founder, Nipun Capital
Senior Fellow, Asian Bureau of Finance and Economic Research (ABFER)
Download Slides 

Moderator: Professor Bernard Yeung
Dean and Stephen Riady Distinguished Professor in Finance and Strategic Management, National University of Singapore
President, Asian Bureau of Finance and Economic Research (ABFER)

2:00pm

Speaker

  • Professor Charles Lee

    Professor Charles Lee

     

    Moghadam Family Professor of Management and Professor of Accounting, Stanford University
    Co-Founder, Nipun Capital
    Senior Fellow, Asian Bureau of Finance and Economic Research (ABFER)

    Charles M. C. Lee is the Moghadam Family Professor of Management and Professor of Accounting at the Graduate School of Business (GSB), Stanford University. He is also Co-Founder of Nipun Capital, a San Francisco based asset management firm focused on Asian equities. Professor Lee studies the effect of human cognitive constraints on market participants and factors that impact market pricing efficiency. He has published extensively on topics that span behavioral finance, financial analysis, market microstructure, equity valuation, quantitative investing, and security market regulation. From 2004 to July 2008, he was Managing Director at Barclays Global Investors (BGI; now Blackrock), where he served as Global Head of Equity Research and Co-Head of North America Active Equities.

    Professor Lee has received numerous honors and awards for his research and teaching. He has also served as either Editor or Associate Editor of a number of academic journals, including: the Journal of Finance, The Accounting Review, the Journal of Accounting Research, the Journal of Accounting and Economics, the Review of Accounting Studies, Management Science (Finance), and the Financial Analysts Journal.

    Professor Lee received his BMath from the University of Waterloo (1981), and his MBA (1989) and PhD (1990) from Cornell University. He has been a faculty member at the Michigan Business School (1990-95) and the Johnson Graduate School of Management, Cornell University (1996-2004). From 1995-96 he was Visiting Economist at the New York Stock Exchange. At Cornell he held the Henrietta Johnson Louis Professorship in Management and was Director of the Parker Center for Investment Research. He also served as Co-chair of the Accounting Department at Guanghua School of Management, Peking University (2003-2015).

    Prior to entering academic life, he spent five years in public accounting, the last three in the National Research Department of KPMG, Toronto, Canada. He holds a Certificate in Biblical Studies from Ontario Theological Seminary, and is fluent in Mandarin Chinese.

  • 1
  • 2
Call For Papers
Program Summary
Full Event Schedule
Hotel Information
Singapore Information
Video Gallery
Dress Code
Important Info
 Feedback for this event