Erasmus University Rotterdam
Erasmus School of Economics - Finance Group
Burgemeester Oudlaan 50, PO Box 1738
3000 DR Rotterdam, The Netherlands
Email: smajlbegovic [at] ese.eur.nl
In 2016 I obtained a PhD in Finance at the University of Mannheim. My main research interests lie in empirical asset pricing with an emphasis on price efficiency, investor behavior and short selling.
Flying Under the Radar: The Effects of Short-Sale Disclosure Rules on Investor Behavior and Stock Prices (with S. Jank and C. Roling), Journal of Financial Economics, forthcoming
We study how disclosure requirements for large short positions affect investor behavior and security prices. Short positions accumulate just below the applicable disclosure threshold as certain investors never disclose any of their positions. Further tests suggest that this secrecy is part of investors' general policy of avoiding disclosure to protect their unique, profitable investment strategies against reverse engineering by competitors. No evidence supports the notion that short sellers avoid disclosure because of potential adverse effects on securities’ lending fees, risk of recall, or short squeezes. Finally, the evasive behavior by short sellers in response to transparency regulations hampers price discovery.
Regional Economic Activity and Stock Returns, Journal of Financial and Quantitative Analysis, Volume 54, Issue 3, June 2019, Pages 1051-1082
This paper studies the diffusion of regional macroeconomic information into stock prices. I identify all U.S. states that are economically relevant for a company through textual analysis of annual reports and find that economic activity forecasts of company-relevant regions positively predict cross-sectional stock returns. Information arising from all relevant states is more important than that relating to the headquarter state alone. These forecasts also predict firms’ performance and earnings surprises, suggesting that the return predictability stems from future cash flows that are gradually reflected in prices. Finally, regional information takes longer to be incorporated into prices among difficult-to-arbitrage stocks.
PhD Candidate Award for Outstanding Research, 2014 WFA; ACATIS Value Award 2018 (Third prize); Semi-finalist for the Best Paper Award in Investments, 2014 FMA
Using unique data with the complete ownership structure of the German stock market, we study the momentum and contrarian trading of different investor groups. Foreign investors and financial institutions, especially mutual funds, are momentum traders, whereas private investors are contrarians. The disposition effect only partly explains the aggregate contrarian trading of private investors. We document a substantial increase in sales of past loser stocks by momentum traders during the market decline associated with the recent financial crisis 2007–2009. Evidence indicates that these excessive sales pushed prices below their fundamental value and are predictive of the momentum crash in 2009.
We extract the news component of short-selling activity by accounting for important cross-sectional, distributional differences in short interest. The resulting measure of surprise in short interest negatively predicts the cross section of both U.S. and international equity returns. Our results also indicate that this predictability originates from short sellers' informed trading on mispricing and the market's underreaction to the news component of short-sale reports. Consistent with the notion of costly arbitrage, the return predictability is stronger among illiquid, volatile stocks and stocks with high information uncertainty, but importantly, unrelated to short-selling frictions.
Best Paper Award, 2017 Academy of Behavioral Finance & Economics (Europe) Conference
Selected conference presentations: 2019 ERIC, 2017 DGF, 2017 SGF, 2017 ABFE (Europe)
Using security-by-security level data of bank holdings, we study how management-board ties relate to bank trading activity and returns. Accounting for unobservable time-varying stock and bank characteristics, we document five times higher trading activity and an abnormal return of 3.35% per year in stocks of connected companies. This informed trading is driven by net sales, stems from private information about future firm-specific news and is not explained by other observable company links. The effect is particularly pronounced among stocks with an uncertain information environment and companies in distress. Results from plausibly exogenous board turnovers, which address the matching of bank managers to other firms, corroborate our findings. Overall, evidence suggests that management board networks pose an important information source for banks' proprietary trading.
Selected conference presentations: 2020 EFA, 2019 DGF, 2019 CFD
Correlated Information Consumption and Comovement in Financial Markets (with Selin Duz Tan), coming soon
This paper studies how correlated information consumption (IC) of retail investors relate to comovement of stock returns and liquidity. We construct clusters of stocks with correlated IC by employing network analysis on Google co-search activity data. We predict significant comovement in returns and liquidity of stocks within the same cluster. This comovement is linked but not entirely explained by the similarity of prominent return determinants as well as the extent to which a pair of stocks are connected through shared mutual fund holdings, industry classification, and the companies’ headquarter locations. Additional evidence suggests that the documented return comovement is in excess of what rational sources would predict. Our findings have important implications for asset prices and portfolio optimization.
Selected conference presentations: 2020 FMA
Short sellers are perceived as informed, sophisticated investors. Yet little is known about their identity and the determinants of their performance. Using novel data of daily disclosures in Europe, we identify large short positions of individual institutions and study their performance. Hedge funds, the predominant short sellers, receive on average an annualized Fama-French risk-adjusted return of about 5.5%. Although this return is explained by trading on mispricing-related factors, there is considerable variation across funds. Local, diversified, and active funds outperform other funds. We also document a first-mover advantage and an outperformance related to investment horizon and industry experience.
Best PhD Student Paper Award, 2015 DGF PhD Workshop (German Finance Association)
Selected conference presentations: 2016 SFS Cavalcade, 10th Hedge Fund Conference (Imperial College), 2017 FMA Hedge Fund Consortium (Cambridge Judge Business School)
FEB13001 Finance 2, Undergraduate, since Winter 2017
FEM11075 Seminar Advanced Investments, Graduate, since Winter 2018
BERMAMC007 Seminar Asset Pricing, PhD, Autumn 2017 and 2018