Research

Working papers

"Fund Managers’ Ownership and Informativeness of Equity Research Presented at Investment Conferences" (Former job market paper)

R&R at Contemporary Accounting Research

I study whether stock ownership improves or impairs the informativeness of equity research using 1,121 fund managers’ stock recommendations and 344 target prices disclosed at 102 investment conferences between 2009 and 2018. One the one hand, I find that investors’ reactions are stronger if fund managers have observable and large holdings in 13F filings. Therefore, ownership improves the informativeness of equity research perceived by investors. On the other hand, I provide evidence that fund managers’ ownership is usually not associated with one-year abnormal returns, but also that fund managers’ equity research might be used strategically, as some fund managers trade against their stock recommendations and target prices in the quarter immediately following the investment conference. In additional results, I find that this strategic trading only occurs at the immediate quarter following the conference and is stronger when the cost of obtaining a second opinion is high. Overall, the results highlight the existence of potential conflicts of interest that may undermine the interests of investors. Consistently, I find that investors learn over time as their reactions decrease. This study contributes to the debate surrounding the costs and benefits for investors of equity research providers’ ownership.

"Investors’ Quantitative Disclosure: Target Prices by Short Sellers" with L.Paugam, H.Stolowy and W.Zhao

We study a rising phenomenon whereby activist short sellers, who disclose their short theses to circumvent limits to arbitrage, provide quantitative disclosures in the form of target prices. After establishing that those target prices are informative in predicting future returns, we argue that short sellers’ disclosure of target prices reflects a tradeoff between three factors: the speed of price adjustment, the exacerbation of certain risks, and reputation considerations. We find supporting evidence for all three factors—target price disclosures are positively associated with price adjustment speed, the retaliation and challenges from shareholders and analysts, and proxies of short sellers’ information precision, which contributes to their reputation. We further argue and find evidence that the salience and quantitative nature of target prices contribute to the accelerated price adjustment by reducing investors’ processing costs. Taken together, our study sheds light on the economic tradeoffs arising when investors decide to disclose quantitative information.

"Shaping collective action in financial markets through the development of popular expertise: An analysis of Due Diligence posts on WallStreetBets" with Y.Gendron, L.Paugam, and H.Stolowy

R&R at Accounting, Organizations and Society 

Social movements in financial markets have significantly developed in the wake of the 2007-09 financial crisis, resulting in the emergence of various collective actions and demands. We analyze one example of such action undertaken by the r/WallStreetBets (WSB) community (not least through its Due Diligence [DD] section), which disrupted the stock prices of several “meme” stocks (e.g., GameStop) by disseminating influential investment narratives. We study the 150 most upvoted DD posts representing 165,293 words (531 pages) of analysis from WSB. We also interviewed eight members of the WSB community (including six authors of DD posts). We find that a form of popular expertise in the domain of investment narratives emerged, developed, and propagated on this digital platform – to the point of thwarting the ambitions of notorious hedge funds. First, we show that popular expertise took off in the wake of growing resentment among retail investors about the lack of fairness in financial markets. Second, we find that, to appeal to their audience, WSB authors developed and promoted a claim to popular expertise which consists of a hybrid language between traditional financial expertise and an accessible and entertaining writing style, complemented by references to pop culture. Therefore, the rift with traditional financial expertise is not total, as popular experts rely on it to increase the resonance of their investment narratives. Theoretically, our paper improves our understanding of collective actions in financial markets by showing that popular forms of investment expertise sustained by market participants can shape influential collective action initiatives. Overall, our study calls for the mobilization of anthropological theorizing in order to understand the transformation of expertise not only in digitalized markets but also in all spheres of society that see the rise of popular expertise made possible by the Internet and the winds of democratization it conveys.

"ESG Visualization and ESG Performance Evaluation: Evidence the Dow Jones Sustainability World Index" with R.Durand, L.Paugam and H.Stolowy

R&R at Management Science 

"Negative Externalities of Regulation: Identity-Relevant Information in Mandatory Short-Selling Disclosures"

R&R at Abacus