Annual Conference

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Investment Finance

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May 2024

Using mutual fund flows, we evaluate prospect theory with choice outcomes in the market. We provide strong support for prospect theory: under a standard set of parameters, funds whose past returns generate higher prospect theory value attract significantly larger future flows; we also find corrobora...
Keywords: Prospect Theory, Revealed Preference, Investor Demand, Mutual Funds
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Annual Conference

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Investment Finance

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May 2024

This paper employs various machine learning models to analyze how stock characteristics (the "factor zoo") and behavioral biases (the "bias zoo") affect the returns of millions of retail investors in India. We observe that Neural Networks outperform other machine learning and OLS models in uniquely ...
Keywords: Machine Learning, behavioral biases, Retail Investors
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Annual Conference

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Investment Finance

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May 2024

Using submission level data from social media platform Reddit, we rely on the theoretical framework of Pedersen (2022) to examine how social media affects belief formation, price discovery and trading dynamics. Consistent with the predictions on network belief spillover, we find that opinions of har...
Keywords: social media, belief formation, return prediction, short selling, retail investors
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Annual Conference

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Investment Finance

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May 2023

We uncover a significant relationship between the persistence of marketing employment strategy and fund performance in the U.S. mutual fund industry. Using regulatory filings, we show a large heterogeneity in fund companies’ marketing employment share, which refers to the fraction of employees dev...
Keywords: Marketing Employment Share, Persistence Marketing, Bayesian Persuasion, Costly Learning
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Annual Conference

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Investment Finance, Senior Fellows/Fellows

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May 2023

This paper examines the inflation forecastability of cross-sectional stocks. To differentiate the cross-sectional inflation exposures, we make the important observation that cross-sectional stock returns exhibit persistent sensitivity to headline inflation shocks during the calendar month of CPI, an...
Keywords: inflation, individual stock returns, core-CPI, announcements
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