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  • 2022
  • Working Paper

The Disappearing Index Effect
By: Robin Greenwood and Marco Sammon
The abnormal return associated with a stock being added to the S&P 500 has fallen from an average of 3.4% in the 1980s and 7.6% in the 1990s to 0.8% over the past decade. This has occurred despite a significant increase in the percentage of stock market assets linked...  View Details
Keywords: Stocks; Investment Return
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  • Article

Recovering Investor Expectations from Demand for Index Funds
By: Mark Egan, Alexander J. MacKay and Hanbin Yang
We use a revealed-preference approach to estimate investor expectations of stock market returns. Using data on demand for index funds that follow the S&P 500, we develop and estimate a model of investor choice to flexibly recover the time-varying distribution of...  View Details
Keywords: Stock Market Expectations; Demand Estimation; Exchange-traded Funds (ETFs); Demand and Consumers; Investment
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  • Article

Expected Stock Returns Worldwide: A Log-Linear Present-Value Approach
By: Akash Chattopadhyay, Matthew R. Lyle and Charles C.Y. Wang
This study provides the first large-scale study of the performance of expected-return proxies (ERPs) internationally. Analyst-forecast-based ICCs are sparsely populated and not robustly associated with future returns. Earnings-model-forecast-based ICCs are...  View Details
Keywords: Expected Returns; Discount Rates; Fundamental Valuation; Implied Cost Of Capital; International Equity Markets; Present Value; Investment Return; Equity; Markets; Global Range
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  • 2022
  • Working Paper

What Triggers National Stock Market Jumps?
By: Scott R. Baker, Nicholas Bloom, Steven J. Davis and Marco Sammon
We examine newspapers the day after major stock-market jumps to evaluate the proximate cause, geographic source, and clarity of these events from 1900 in the US, 1930 in the UK and 1980 in 12 other countries. We find four main results. First, the United States plays an...  View Details
Keywords: Uncertainty; Policy Uncertainty; Stock Market; Financial Markets; Volatility; Risk and Uncertainty; Policy; Newspapers
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  • January 2022 (Revised February 2022)
  • Case

Introducing EVA at ISS: A Better Way to Evaluate CEO Performance and Compensation?
By: Jonas Heese, Charles C.Y. Wang and James Weber
In early 2019, Anthony Campagna, the global director of fundamental research at ISS EVA, a unit of the proxy advisory firm Institutional Shareholder Services (ISS), was preparing to release ISS's analyses of public company performance and CEO compensation ahead of Say...  View Details
Keywords: Jobs and Positions; Compensation and Benefits; Performance; Performance Productivity; Measurement and Metrics; Analytics and Data Science; Value; Business or Company Management; Performance Evaluation; Business and Shareholder Relations
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  • 2022
  • Working Paper

Heterogeneous Investors and Stock Market Fluctuations
By: Odhrain McCarthy and Sebastian Hillenbrand
We introduce a heterogeneous agent model which features extrapolative beliefs and time-varying risk aversion. The model leads to an empirical framework which we estimate with stock prices, survey data and risk aversion measures. We find that extrapolative beliefs and...  View Details
Keywords: Stock Market; Investment Decisions; Asset Pricing; Investment; Behavioral Finance; Stocks
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  • 2021
  • Working Paper

Stock Investors' Returns Are Exaggerated
By: Jesse M. Fried, Paul Ma and Charles C.Y. Wang
The stock market generates less wealth than it appears. We show that total shareholder return (TSR), the standard measure of stock investor performance, substantially exaggerates returns earned by these investors in aggregate, and thus by most investors. The main...  View Details
Keywords: All-shareholder Returns; Capital Flows; Dividend Reinvestment; Equity Premium; Total Shareholder Returns; Stocks; Investment Return; Market Timing
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  • November 2021 (Revised January 2023)
  • Case

The Global Great Depression, 1929-1939
By: Alberto Cavallo, Sophus A. Reinert and Federica Gabrieli
The Great Depression was, by far, the worst economic contraction of the twentieth century, and some of the most important ideas about both fiscal and monetary policy in the second half of the century were developed in response to it. The economic collapse, which...  View Details
Keywords: Great Depression; Economic Conditions; Unemployment; Homelessness; Financial Crisis; History; Economy; Policy; Poverty; Social Issues; Economic Slowdown and Stagnation
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  • 2021
  • Working Paper

Going by the Book: Valuation Ratios and Stock Returns
By: Ki-Soon Choi, Eric So and Charles C.Y. Wang
We study the use of firms’ book-to-market ratios (B/M) in value investing and its implications for comovements in firms’ stock returns and trading volumes. We show B/M has become increasingly detached from common alternative valuation ratios over time while also...  View Details
Keywords: Valuation Ratios; Book-to-market Ratios; Investment Return; Investment; Decision Making
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  • March 2021
  • Technical Note

Competitive Strategy in International Construction
By: John D. Macomber and Emrah Ergelen
Construction of buildings and infrastructure is one of the largest industries in the world in terms of volume. It is also one of the most physically risky, financially uncertain, and politically impacted. The industry is highly fragmented since there are few economies...  View Details
Keywords: Construction; Infrastructure; Strategy; Marketing Strategy; Competitive Strategy; Strategic Planning; Global Range; Construction Industry
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  • 2022
  • Working Paper

Canary Categories
By: Eric Anderson, Chaoqun Chen, Ayelet Israeli and Duncan Simester
Past customer spending in a category is generally a positive signal of future customer spending. We show that there exist “Canary Categories” for which the reverse is true. The more customers purchase in these categories, the less likely these customers are to return...  View Details
Keywords: Churn; Churn Management; Churn/retention; Retention; Assortment Planning; Retail; Retailing; Retailing Industry; Preference Heterogeneity; Customer Relationship Management; Consumer Behavior; Retail Industry; United States
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  • January–February 2021
  • Article

Cross‐firm Return Predictability and Accounting Quality
By: Wen Chen, Mozaffar Khan, Leonid Kogan and George Serafeim
We test the hypothesis that if poor accounting quality (AQ) is associated with poor investor understanding of firms’ revenue and cost structures, then poor AQ stocks likely respond more slowly than good AQ stocks to new non‐idiosyncratic information that affects both...  View Details
Keywords: Accounting Quality; Earnings Quality; Stock Returns; Investment Strategy; Accounting; Business Earnings; Quality; Investment Return; Investment; Strategy
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  • January 2021
  • Article

Turbulence, Firm Decentralization and Growth in Bad Times
By: Philippe Aghion, Nicholas Bloom, Brian Lucking, Raffaella Sadun and John Van Reenen
What is the optimal form of firm organization during “bad times”? We present a model of delegation within the firm to show that the effect is ambiguous. The greater turbulence following macro shocks may benefit decentralized firms because the value of local information...  View Details
Keywords: Decentralization; Growth; Turbulence; Great Recession; Organizational Design; System Shocks; Economic Growth; Performance
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  • December 2020
  • Article

Stock Market Returns and Consumption
By: Marco Di Maggio, Amir Kermani and Kaveh Majlesi
This paper employs Swedish data containing security level information on households' stock holdings to investigate how consumption responds to changes in stock market returns. We exploit households’ portfolio weights in previous years as an instrument for actual...  View Details
Keywords: Capital Gain; Dividend Income; Consumption; Near-rational Behavior; Investment Return; Household; Spending; Behavior
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  • 2022
  • Working Paper

The Stock Market Value of Human Capital Creation
By: Matthias Regier and Ethan Rouen
We develop a measure of firm-year-specific human capital investment from publicly disclosed personnel expenses (PE) and examine the stock market valuation of this investment. Measuring the future value of PE (PEFV) based on the relation between lagged...  View Details
Keywords: Intangibles; Market Valuation; Human Capital; Stocks; Financial Markets; Valuation
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  • 2021
  • Working Paper

Long-Run Returns to Impact Investing in Emerging Markets and Developing Economies
By: Shawn Cole, Martin Melecky, Florian Mölders and Tristan Reed
There is growing interest in impact investing, the idea of deploying capital to obtain both financial and social or environmental returns. Examination of every equity investment made by the International Finance Corporation, one of the largest and longest-operating...  View Details
Keywords: Impact Investing; Investment; Emerging Markets; Developing Countries and Economies; Investment Return
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  • August 2020 (Revised December 2020)
  • Case

Latam Airlines and COVID-19: Seeking Bankruptcy Protection in the United States
By: Laura Alfaro, Mauricio Larrain, Carlos Vilches and Sarah Jeong
On May 26, 2020, Latam Airlines became the largest airline in the world to be driven to bankruptcy by COVID-19. With a complex debt structure and international investor composition, the company decided to file for bankruptcy protection in the United States, which...  View Details
Keywords: Airlines; Pandemic; Coronavirus Pandemic; Health Pandemics; Air Transportation; Insolvency and Bankruptcy; Capital Markets; Strategy; Latin America; Chile; United States
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  • May–June 2020
  • Article

Interfirm Ties Between Ventures and Limited Partners of Venture Capital Funds: Performance Effects in Financial Markets
By: Umit Ozmel, M. Deniz Yavuz, Timothy E. Trombley and Ranjay Gulati
We argue that strong indirect ties are conducive to the transfer of private information, which provides an advantage in identifying profitable investment opportunities. In our context, a strong indirect tie is generated between an investor and a focal firm if the...  View Details
Keywords: Interfirm Ties; Social Networks; Venture Capital; Entrepreneurship; Performance
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  • 2020
  • Working Paper

Aggregate and Firm-Level Stock Returns During Pandemics, in Real Time
By: Laura Alfaro, Anusha Chari, Andrew Greenland and Peter K. Schott
We show that unexpected changes in the trajectory of COVID-19 infections predict U.S. stock returns, in real time. Parameter estimates indicate that an unanticipated doubling (halving) of projected infections forecasts next-day decreases (increases) in aggregate U.S....  View Details
Keywords: COVID-19; Stock Returns; Health Pandemics; Stocks; Investment Return; Forecasting and Prediction
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  • 2021
  • Working Paper

Recovering Investor Expectations from Demand for Index Funds
By: Mark Egan, Alexander J. MacKay and Hanbin Yang
We use a revealed-preference approach to estimate investor expectations of stock market returns. Using data on demand for index funds that follow the S&P 500, we develop and estimate a model of investor choice to flexibly recover the time-varying distribution of...  View Details
Keywords: Stock Market Expectations; Demand Estimation; Exchange-traded Funds (ETFs); Demand and Consumers; Investment; United States
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