Investment Research

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Investment Research by Mind Map: Investment Research

1. Feedback Frequency

1.1. And Risk Taking

1.1.1. Lab Experiments

1.1.1.1. Greater evaluation and decision frequency leads to greater risk aversion. (Gneezy & Potters 1997)

1.1.1.1.1. Effect is explainable solely by feedback frequency. (Bellemare, Krause et al 2005)

1.1.1.1.2. Effect is generated mostly by decision frequency. (Weber & Langer 2008)

1.1.1.1.3. Effect is about the same (Fellner Sutter 2009)

1.1.1.2. Longer evaluation period leads to greater risk taking. Shifting the return distribution upwards to remove losses also increases risk-taking. More frequent feedback took the least risk and earned the least money. (Thaler, Tversky, Kahneman and Schwartz 1997)

1.1.1.2.1. Subjects didn't know distributions.

1.1.1.3. More information and more flexibility (to trade) result in less risk taking. (Gneezy, Kapteyn & Potters 2003)

1.1.1.4. Less frequent feedback and longer horizons leads to greater risk-taking, but people prefer more information and shorter horizons. (Fellner & Sutter 2009)

1.1.1.5. Workers invest more of their retirement savings in stocks if they are shown long-term (rather than one-year) rates of return. (Benartzi & Thaler 1999)

1.1.1.6. In operations management tasks, more frequent feedback can be damaging (Lurie & Swaminathan 2008)

1.1.1.7. Haigh List 2005

1.1.2. Field Experiments

1.2. And Impact on Asset Pricing

1.2.1. Shifting small-cap Israeli stocks between daily and weekly trading impacts subsequent returns. (Kliger & Levit 2009)

1.3. And Equity Premium

1.3.1. To review (Barberis Huang Santos 2001)

1.3.2. Annual portfolio evaluation explains observed equity premium. (Benartzi & Thaler 1995)

1.3.3. More-frequent evaluation yields additional opportunites for perverse disposition-effect-driven action, increasing equity premium. (Roger 2009)

1.4. And Trading Activity

1.4.1. Individuals who trade more often perform worse. (Odean 2000)

1.4.1.1. Supported by Anderson 2007. Individuals underperform by 8.5% p.a. on average.

1.5. Generally

1.5.1. Kluger Denisi 1996

1.5.2. Kluger DeNisi 1998

2. Investor Behavior

2.1. Factors Impacting Risk Preferences

2.1.1. Biological

2.1.1.1. Field Studies

2.1.1.1.1. 2D:4D finger ratio correlates with trading success (Coates, Gurnell, Rustichini 2009)

2.1.1.1.2. Endogenous steroids correlate with profitability. (Coates and Herbert 2008)

2.1.1.2. Lab Studies

2.1.1.2.1. Testosterone levels correlate with risk-taking; 2D:4D does not. (Apicella, Dreber, Campbell et al 2008)

2.1.1.3. Gender

2.1.1.3.1. Men trade more often, sell more readily in 2008-2009 downturn (Ameriks et al 2009 Vanguard)

2.1.2. Emotions

2.1.2.1. Sadness leads to reverse-endowment effect. Disgust leads to lower selling prices. (Lerner Small 2004)

2.1.2.2. Confident sensation-seekers trade more frequently (Grinblatt Keloharju 2009)

2.1.2.3. Emotion-deficient subjects make better investors (Shiv, Lowenstein, Damasio et al 2005)

2.1.3. Generational

2.1.3.1. Generational market experiences shape investor behavior (Malmendier et al 2009 NBER 14813)

2.1.3.1.1. Younger fund managers chased internet stocks more. (Greenwood & Nagel 2009)

2.1.4. Presentation

2.1.4.1. Risk presentation can stabilize risk preferences. 2009

2.1.4.2. Run Length (diff btwn trend and endpoint) impacts risk preferences. (Raghubir Das 2009)

2.1.5. Simplicity Seeking

2.1.5.1. More funds in 401k leads to lower risk and lower participation (Iyengar Kamenica 2008)

2.1.6. Minor Factors

2.1.6.1. Touch can "re-set" risk preferences after priming feelings of uncertainty. (Levav forthcoming)

2.1.6.2. National sports outcomes impact stock performance (Edmans et al 2007)

2.2. Difficulty of Teaching

2.2.1. Conflict disclosure doesn't help, can hurt (Cain, Loewenstein, Moore 2005)

2.2.2. Wharton MBAs, other smart people don't understand index fund fees. (Choi, Liabson, Madrian)

2.2.3. Seru, Shumway and Stoffman 2009

2.3. Ways to Improve

2.3.1. Save More Tomorrow (Benartzi & Thaler 2004)

2.3.2. Lifecycle funds prevent observation of each sub-fund's volatility (Zweig p225)

2.3.3. Stickk.com - Contract with yourself for future behavior.

2.4. Return Chasing

2.4.1. Mutual Fund Investors

2.4.1.1. Unsophisticated retail money appears to enter mutual funds in good times (Glode et al 2009, NBER 15038)

2.4.1.2. Investors in mutual funds buy high, sell low (Morningstar & Lipper, Nesbitt 1995)

2.4.1.3. Mutual fund investors chase returns, 1991-2004; lose by 1.6% p.a. (Friesen & Sapp 2007)

2.4.1.4. Investors underestimate impact of selection bias in advertised mutual funds (Koehler & Mercer 2009)

2.4.2. Plan Sponsors chase performance in manager hirings (Goyal & Wahal 2008)

2.4.3. Swiss pension plans pursue active mgmt despite underperformance. (Gort 2009)

2.4.4. Younger mutual fund managers chased internet stocks more.

2.4.5. Grinblatt Keloharju 2001

2.4.6. Brunnermeier and Nagel 2004

2.4.7. Cooper, Gutierrez and Hameed 2004

2.4.8. People detect "streaks" in random sequences (hot hand in basketball) (Vallone & Tversky 1985)

2.4.8.1. Also seen in Hogarth & Makridakis 1981.

2.5. Surveys

2.5.1. Average investor underperforms market, panics, acts pro-cyclically (Dalbar Corp. 2009)

2.5.2. Psychology & Economics: Evidence from the Field (DellaVigna 2009)

2.6. Mental Accounting

2.6.1. Favors selling winners and holding losers (Thaler 1999 cites Shefrin & Statman 1987, Odean 1998)

2.6.2. Investors sell winners more than losers, but winners do better. (Odean 1998)

2.7. Neuroeconomics

2.7.1. Process saved papers in folder

2.8. Evolutionary Perspective

2.8.1. Evolutionary Perspective on Behavioral Bias (Haselton et al 2009)

2.9. Depletion

2.9.1. Strength Model of Self-Control Baumeister et al 2007

2.9.2. Ego Depletion and Self-Regulation Baumeister 2003

3. Cycles & Cyclical Behavior

3.1. Thoughts on Central Banks response to asset price volatility. Bernanke

3.2. History

3.2.1. LT history of cycles and depressions; explains equity premium. Barro et al 2009; NBER

3.3. Pro-Cyclical Forces

3.3.1. Career Risk

3.3.1.1. In a stylized model, career concerns amplify pricing shocks. (Guerrieri et al 2009, NBER 14898)

3.3.2. Liquidity

3.3.2.1. Confidence, liquidity and haircuts on repo securities. Gorton & Metrick 2009

3.3.3. Herding & Sentiment

3.3.3.1. Rushing for the exit - overview and impacts considered. Pedersen 2009 NBER 15297

3.3.3.2. Analyst predictions are procyclical and reflect investor sentiment. (Qiang 2009)

3.3.3.3. Asset pricing models must consider risk premium as high, time-varying and correlated with state of economy. (Campbell 1998, NBER 6485)

3.3.3.4. Bubbles form endogenously in a lab experiment. (Hommes et al 2007)

3.3.3.5. Investor sentiment is a contrary indicator (Baker et al 2009)

3.4. Yield curve and biz cycle

4. JDM Misc

4.1. Selective survey of evidence on persuasion senders and receivers DellaVigna 2009 NBER 15298

4.2. People model neighbors' car-buying behavior (Grinblatt 2009)

5. Inefficiencies

5.1. 40 Years of Value Investing: Seminal Articles (2006)

5.2. Mutual fund managers can beat market in their best ideas (Cohen Polk Silli 2008)

5.3. Mutual fund manager can beat market in their best ideas. (Pomorski 2009)

5.4. Efficient Market Hypothesis & its Critics - hard to beat market - Malkiel 2003

5.5. Contrary to EMH, form of earnings disclosures matter to professional analysts (Hirst Hopkins 1998)

5.6. Investor Sentiment and the Closed End Fund Puzzle (Shleifer Thaler Lee 1991)

6. To File

6.1. Malkiel 2007 bad hedge funds exit indices

6.2. Diction

6.2.1. Investor reaction to tone in earnings releases. Henry, Elaine 2008.

6.3. Behavioral Biases and Investment Massa 2005

6.4. Alon Brav

6.5. Dan Goldstein

7. Investment Management

7.1. 13-F and confidential treatment for holdings (Agarwal et al 2009 unpub)

8. SPACs

8.1. Blank Check IPOs: A Home Run for Management (Jog & Sun 2007)

8.2. Mgmt rigs votes by buying shares; mkt predicts acq success (Jenkinson Sousa 2007)

8.3. Discounts

8.3.1. On closed-end funds

8.4. Overviews

8.4.1. SPACs as an asset class

8.4.2. Overview, case studies

8.4.3. Another overview

8.5. Shell Games Floros Sapp 2009