Annual Conference

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Investment Finance

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May 2021

Sustainability or Performance? Ratings and Fund Managers' Incentives

Mariassunta GIANNETTI, Nickolay GANTCHEV, Rachel LI
We explore how mutual funds react when the tradeoff between sustainability and performance becomes salient. Following the introduction of Morningstar’s sustainability ratings (the “globe” ratings), mutual funds increased their holdings of sustainable stocks in order to improve their globe rati...
Keywords: Sustainability, ESG, Mutual Funds, Fund Flows, Ratings
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Annual Conference

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Investment Finance, Senior Fellows/Fellows

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May 2021

The China-U.S. Equity Valuation Gap

Xiaoyan ZHANG, Shuojia KE, Geert BEKAERT
Before 2009, the market average price earnings ratio of Chinese firms is significantly higher than that of the U.S. firms, while after 2009, the valuation gap reverses. Using data from 1995 to 2018, we examine the dynamics and sources of valuation differentials between comparable Chinese and U.S. fi...
Keywords: Chinese stock prices, market integration, financial development, stock valuation, earnings yields, price earnings ratios, speculative trading.
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Annual Conference

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Investment Finance

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May 2021

Attention Spillover in Asset Pricing

Jianfeng YU, Li AN, Xin CHEN
Exploiting a screen display feature whereby the order of stock display is determined by the stock listing codes, we lever a novel identification strategy and study the impact of attention spillover on stock prices and turnover. We find that stocks with neighbors on the display that experience higher...
Keywords: limited attention, overconfidence, attention spillover, price impact, return predictability
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Annual Conference

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Investment Finance, Senior Fellows/Fellows

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May 2021

Is Hard and Soft Information Substitutable? Evidence from the Lockdowns

Massimo MASSA, Jennie BAI
We study information substitutability in the financial market through a quasi-natural experiment: the pandemic-triggered lockdown that has hampered people's physical interactions hence the ability to collect, process, and transmit soft information. Exploiting the cross-sectional and time-series vari...
Keywords: Mutual Funds, Soft information, COVID-19, proximity investing, performance
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Annual Conference

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Investment Finance

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May 2021

Taking Sides on Return Predictability

R. David MCLEAN, Jeffrey PONTIFF, Christopher REILLY
We study how 9 different market participants trade with respect to 130 different stock return anomalies and how each participant’s trades predict returns. Retail investors trade against anomalies, while firms’ and short sellers’ trades agree with anomalies. Institutional portfolios are weighte...
Keywords: Trading, return predictability, retail investors, institutions.
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