Annual Conference

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Investment Finance

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May 2024

Using a structural model, we estimate the value of data to fixed income investors and study its main drivers. In the model, data is more valuable for bonds that are volatile and for which price-insensitive liquidity trades are more likely. Empirically, we find that the value of data on corporate bon...
Keywords: value of data, information, fixed income, corporate bond, mutual fund
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Annual Conference

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Investment Finance

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May 2024

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

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May 2024

Inventory models posit that return autocorrelation is affected by collateral, volume, and expected volatility. We show that daily market autocorrelations are lower on negative return days, consistent with collateral concerns. Unlike previous literature, we document a strong role of volatility on aut...
Keywords: Market Liquidity, Volatility, Serial Correlation, Collateral, Liquidity Risk
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Annual Conference

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Investment Finance

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May 2024

Frequent, yet uninformed, market timing recommendations by a financial advisory firm generate significant flows for Chilean pension funds. These flows give rise to substantial changes in the Chilean foreign exchange due to the funds’ high allocation to international equities. Hedging by local bank...
Keywords: exchange rates, CIP deviations, Pension Funds, market efficiency
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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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