Working Papers
 
  
Reconsidering Returns
    with David Solomon


Investors rarely see returns which impacts how major portfolios covary with the market, how the financial press covers market performance and how investors allocate flows to mutual funds. 

 
     

Do Investors Value Sustainability? A Natural Experiment Examining Ranking and Fund Flows
    with Abigail Sussman


Mutual fund investors value sustainability, though they focus on extreme categories, largely ignoring the middle and other details. Experimental evidence suggests that higher sustainability is viewed as a positive predictor of future performance, but we do not find evidence of such performance in the data. 
 
 
The Dividend Disconnect
    with David Solomon
    Revise and Resubmit, Journal of Finance
    
           Charles Brandes Prize 2017


Investors trade as if they consider dividends and capital gains in separate mental accounts, without fully appreciating that dividends come at the expense of price decreases - the free dividends fallacy.Time-varying demand for dividends impacts valuations and a lack of dividend reinvestment leads to predictable market returns. 
 

 

Recurring Firm Events and Predictable Returns: The Within-Firm Time-Series
    with David Solomon
    Prepared for the Annual Review of Financial Economics

We review the literature on recurring firm events and predictable returns (e.g. earnings, dividends and return seasonality), to show that these events represent a striking asset pricing phenomena that should be considered together.  

Publications
   

 
  A Tough Act to Follow: Contrast Effects in Financial Markets
    with Kelly Shue
    Journal of Finance, Forthcoming            

AQR Insight Award 2016
Finalist Hillcrest Behavioral Finance Award 2015

Contrast effects impact equilibrium asset prices in financial markets. The reaction to earnings announcements are biased by contrast effects with the previous day's earnings surprise.

 


 

Rolling Mental Accounts
    with Cary Frydman and David Solomon
    Review of Financial Studies, Forthcoming

Media Coverage: Capital IdeasIOI 

Mental accounts are not always closed when an investor sells a stock – a sale does not always conclude an investing episode. Instead, investors may “roll” an account from one asset to another, by selling the original asset and buying another within a short period of time.



 Being Surprised by the Unsurprising: Earnings Seasonality and Stock Returns
    Review of Financial Studies, 2017, 30(1): 281-323.

Hillcrest Behavioral Finance Award 2015
Best paper California Corporate Finance Conference 2015

Many companies have earnings that historically are larger in one quarter of a year. These companies have high returns in this quarter because investors overweight recent low earnings.


   Economic Uncertainty and interest Rates
    (Lead Article) Review of Asset Pricing Studies, 2016, 6(2): 179-220.

Best paper Review of Asset Pricing Studies 2016

Media Coverage: CFA Institute

The real interest rate has a strong inverse relation with economic uncertainty partially resolving a puzzling lack of relation between the interest rate and economic growth.
 
http://blogs.wsj.com/moneybeat/2014/12/05/juicing-stock-returns-and-getting-squeezed/
   
    (Lead Article) Journal of Financial Economics, 2015, 116(3): 433-451.
     
Fama/DFA Second Prize for Capital Markets and Asset Pricing, Journal of Financial Economics 2015


Many mutual funds actively trade to artificially enhance their dividend yield (which we call juicing), but do not provide increased returns. Investors reward these funds with flows, but may not have enough information to know the dividend yield is coming from juicing.
 


 

The Worst, the Best, Ignoring All the Rest: The Rank Effect and Trading Behavior
    Review of Financial Studies, 2015,  28(4): 1024-1059.    Internet Appendix

Cubist Systematic Strategies PhD Award for Outstanding Research, WFA 2014
Finalist AQR Insight Award 2014
UBS Global Asset Management Award, Financial Research Association 2013
Michael J. Barclay Award, Financial Research Association 2013

Media Coverage:
 Wall Street JournalBloomberg NewsAlpha Architect929Capital IdeasCFA Digest

Investors do not view each stock individually, they compare positions across their portfolio and sell their biggest winners and losers. 

 
   

The Dividend Month Premium
    with David Solomon
    Journal of Financial Economics, 2013, 109(3), 640-660.

Best paper California Corporate Finance Conference 2011

There is a significant anomaly in months firms are expected to pay dividends due to price-pressure from dividend seeking investors.
 
   

    with David Solomon
    Quarterly Journal of Finance, 2012, 2(3), 1250013.

Media Coverage: Alpha Architect

There is a strong disposition effect in prediction markets for NFL games, which is difficult to explain for many explanations of the disposition effect.