Extreme Stock Market Performers, Part I: Expect Some Drawdowns (2020)
Hendrik Bessembinder
SSRN Working Paper, URL
The sixth of seven AGNOSTIC Papers on the extreme concentration in stock markets. This one shows that even for the top wealth-creators, the road to success has been anything but smooth…
Extreme Stock Market Performers, Part IV: Can Observable Characteristics Forecast Outcomes (2020)
Hendrik Bessembinder
SSRN Working Paper, URL
The fifth of seven AGNOSTIC Papers on the extreme concentration in stock markets. This one will finally examine how to identify the few big winners ex-ante (at least it will try). Future winners have some distinct fundamental characteristics today. That said, the picture remains noisy and it’s very difficult to find them systematically…
Extreme Stock Market Performers, Part III: What are their Observable Characteristics? (2020)
Hendrik Bessembinder
SSRN Working Paper, URL
The fourth of seven AGNOSTIC Papers about the extreme concentration in stock markets. This one goes one step further and examines the fundamental characteristics of big winners ex-post. The main insight is quite intuitive: outstanding stock performance usually comes with outstanding fundamental performance of the underlying company…
Extreme Stock Market Performers, Part II: Do Technology Stocks Dominate? (2020)
Hendrik Bessembinder
SSRN Working Paper, URL
The third of seven AGNOSTIC Papers about the extreme concentration within stock markets. This one examines the industry composition of the most and least successful companies between 1950 and 2019 in the US. Unfortunately, just looking at industries is not really helpful to identify the few big winners…
Long-Term Shareholder Returns: Evidence from 64,000 Global Stocks (2021)
Hendrik Bessembinder, Ta-Feng Chen, Goeun Choi, K.C. John Wei
SSRN Working Paper, URL
The second of seven AGNOSTIC Papers about the extreme concentration within stock markets. This one goes beyond the US and examines global stock markets between 1990 and 2020. The pattern of extreme concentration is very similar for 41 countries beside the US and in some cases even stronger.
Do stocks outperform Treasury bills? (2018)
Hendrik Bessembinder
Journal of Financial Economics 129(3), 440-457, URL
I try to be careful with superlatives, but I think that this week’s AGNOSTIC Paper(s) are a must-read for everyone seriously interested in stock markets.
A few very successful companies drive the entire US market while the majority of stocks underperform even risk-free treasuries. Moreover, the most frequent lifetime return for U.S. companies is -100%. Those brutal empirical facts have strong implications for investors.
Equity Investing in the Age of Intangibles (2021)
Amitabh Dugar & Jacob Pozharny
Financial Analysts Journal, 77(2), 21-42, URL
Given the exceptional decade for technology companies, I am late to the party with this one. This week’s AGNOSTIC Paper examines the role of intangible assets for equity investors.
The issue is at the heart of fundamental analysis and also relevant for systematic investors. The authors present several interesting results for a global sample of thousands of companies between 1994 and 2018.
Harnessing Neuroscientific Insights to Generate Alpha (2022)
Elise Payzan-LeNestour, James Doran, Lionnel Pradier, Tālis J. Putniņš
Financial Analysts Journal, 78(2), 79-95, URL
We are all prone to psychological biases that are very hard to control. This week’s AGNOSTIC Paper examines the after-effect, one particular example for this.
The idea of the after-effect is simple. If you are long enough exposed to a certain stimuli, you will have the illusion of the exact opposite stimuli after the first one disappears. Apparently, this pattern was very relevant for the US stock market…
Music sentiment and stock returns around the world (2021)
Alex Edmans, Adrian Fernandez-Perez, Alexandre Garel, Ivan Indriawan
Journal of Financial Economics, In Press, Corrected Proof, URL
This week’s AGNOSTIC Paper examines the role of music sentiment in the stock market. What sounds like statistical hocus-pocus is part of an important question. Do other factors than rational information drive stock markets?
I like the paper for its creative use of alternative data and its clean methodology. But to be honest, I was somewhat skeptical when I first heard about it. However, the authors present an intuitive economic rationale and rigorously test their hypotheses in various robustness checks. The results are quite interesting…
Predicting Performance Using Consumer Big Data (2022)
Kenneth Froot, Namho Kang, Gideon Ozik, Ronnie Sadka
The Journal of Portfolio Management 48(3), 47-61, URL
This week’s AGNOSTIC Paper is again more related to my other content. The authors use proxies for in-store activity, brand awareness, and web traffic to predict fundamentals and returns of consumer-oriented companies.
I like the paper because it examines alternative data and is published in a peer-reviewed journal. Other studies on the topic are often just white papers of data providers. So it is nice to have a more scientific analysis.