Asset Management

High returns for investors. Our author argues that a different approach to ESG can strike a better balance between environmental and social goals and profits.

We develop a model of information and portfolio choice in which ex ante identical investors choose to specialize because of fixed attention costs required in learning about securities. Without this friction, investors would invest in all securities and would be indifferent across a wide range of information choices. When securities' dividends depend on an aggregate (macro) risk factor and an idiosyncratic (micro) shocks, fixed attention costs lead investors to specialize in either macro or micro information.

The composition of natural liquidity has been changing over time. An analysis of intraday volumes for the S&P500 constituent stocks illustrates that (i) volume surprises, i.e., deviations from their respective forecasts, are correlated across stocks, and (ii) this correlation increases during the last few hours of the trading session.

We provide an applied introduction to Bayesian estimation methods for empirical accounting research. To showcase the methods, we compare and contrast the estimation of accruals models via a Bayesian approach with the literature’s standard approach. The standard approach takes a given model of normal accruals for granted and neglects any uncertainty about the model and its parameters. By contrast, our Bayesian approach allows incorporating parameter and model uncertainty into the estimation of normal accruals.

We study the performance of many traditional and novel, text-based variables for in-sample and out-of-sample forecasting of oil spot, futures, and energy company stock returns, and changes in oil volatility, production, and inventories. After controlling for small-sample biases, we find evidence of in-sample predictability. Our text measures, derived using energy news articles, hold their own against traditional variables.

We study qualitative information disclosure by mutual funds when investors learn from these disclosures in addition to past performance. We show theoretically that fund managers with specialized strategies optimally choose to disclose detailed strategy descriptions, while managers with standardized strategies provide generic descriptions. Generic descriptions lead to errors in benchmarking by investors and thus higher volatility in capital flows.

We follow a representative panel of millions of consumers in the U.S. from 2007 to 2017 and document several facts on the long-term effects of the Great Recession. There were about six million foreclosures in the ten-year period after Lehman's collapse. Owners of multiple homes accounted for 25% of these foreclosures, while comprising only 13% of the market. Foreclosures displaced homeowners, with most of them moving at least once. Only a quarter of foreclosed households regained homeownership, taking an average four years to do so.