Annual Conference

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Investment Finance

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May 2024

Revisiting the Cross-Section of Expected Stock Returns: Evidence from a Textual Analysis of Buy Recommendations

Hailiang CHEN, Byoung-Hyoun HWANG, Zhuozhen PENG
Our paper examines sell-side analyst reports and online stock opinion articles, which recommend that investors buy stocks that, based on prior literature, trade at comparatively high prices and earn low future returns. We conduct textual analysis and test whether the justifications provided in these...
Keywords: Cross-Section of Expected Stock Returns, Anomalies, Risk, Behavioral Finance, Textual Analysis.
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Annual Conference

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Investment Finance

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May 2024

Resolving Estimation Ambiguity

Paul H. DECAIRE, Denis SOSYURA, Michael D. WITTRY
Using valuation models of financial analysts, we identify the drivers of disagreement in stock valuation. Disagreement in the discount rate is as important in explaining the variation in a stock’s intrinsic value as the disagreement in expected cash flows. Analysts derive the discount rate by esti...
Keywords: Disagreement, Security Valuation, Model Inputs, Subjective Beliefs
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Annual Conference

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Investment Finance, Senior Fellows/Fellows

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May 2016

Rent Seeking by Low-Latency Traders: Evidence from Trading on Macroeconomic Announcements

Tarun CHORDIA, T. Clifton GREEN, Badrinath KOTTIMUKKALUR
Prices of the highly liquid S&P500 exchange traded fund (SPY) and the E-mini future (ES) respond to macroeconomic announcement surprises within five milliseconds, with trading intensity increasing over a hundred-fold following the news release. However, profits from trading quickly are relativel...
Keywords: HFT
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Annual Conference

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Investment Finance

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May 2019

Rating on a Curve

Utpal BHATTACHARYA, Ariel Yu ZHANG, Janghoon SHON
We document that if an analyst is covering a strong pool, the best firm is rated less highly than it would be otherwise, and if the analyst is covering a weak pool, the worst firm is rated less badly than it would be otherwise. These relative ratings affect dispersion in recommendations. Blindly fol...
Keywords: analyst, recommendation, target price
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Annual Conference

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Investment Finance

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May 2024

Prospect Theory in the Field: Revealed Preferences from Mutual Fund Flows

Bing HAN, Pengfei SUI, Wenhao YANG
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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