Annual Conference

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Investment Finance

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May 2018

Global Market Inefficiencies

Söhnke M. BARTRAM, Mark GRINBLATT
Using point-in-time accounting data, we estimate monthly fair values of 25,000+ stocks from 36 countries. A trading strategy based on deviations from fair value earns significant risk-adjusted returns (“alpha”) in most regions, especially Asia-Pacific, that are unrelated to known anomalies. The ...
Keywords: International finance, valuation, Asset Pricing, market efficiency, Fundamental analysis, Point-in-time, Transaction costs, Principal components, Instrumented principal components analysis
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Annual Conference

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Investment Finance

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May 2018

Liquidity Provision Contracts and Market Quality: Evidence from the New York Stock Exchange

Hendrik BESSEMBINDER, Jia HAO, Kuncheng (K.C.) ZHENG
We exploit a discontinuity in the New York Stock Exchange Designated Market Maker (DMM) contract to identify causal effects of DMM participation on equilibrium market outcomes. We document that contractual features that enhance DMM participation are associated with increased depth, narrower bid-ask ...
Keywords: Liquidity provision, designated market maker, NYSE
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Annual Conference

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Investment Finance

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May 2018

The Promises and Pitfalls of Robo-advising

Nagpurnanand PRABHALA, Francesco DACUNTO, Alberto G. ROSSI
We study a robo-advising portfolio optimizer that constructs tailored strategies based on investors' holdings and preferences. Adopters are similar to non-adopters in terms of demographics, but have more assets under management, trade more, and have higher risk-adjusted performance. The robo-advisin...
Keywords: FinTech, portfolio choice, Behavioral finance, Individual Investors, Financial Literacy, Technology Adoption
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Annual Conference

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Investment Finance

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May 2018

Are Disagreements Agreeable? Evidence from Information Aggregation

Dashan HUANG, Jiangyuan LI, Liyao WANG, Guofu ZHOU
Most studies on disagreement focus on cross-sectional asset returns and the well-recognized disagreement measures generally cannot predict the stock market with a horizon less than 12 months. This paper proposes three aggregate disagreement indexes by aggregating information across 20 disagreement m...
Keywords: Disagreement, Market risk premium, Predictability, Information aggregation, PLS
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Annual Conference

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Investment Finance, Senior Fellows/Fellows

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May 2018

Hacking Reverse Mortgages

Deborah LUCAS
Reverse mortgages allow retirees to access a portion of their home equity to meet spending needs while insuring that they can age in place. In the U.S., almost all reverse mortgages are in the form of a Home Equity Conversion Mortgage (HECM)--a product designed and administered by the federal govern...
Keywords: Reverse mortgage, government credit programs
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