Investment
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- 13 Nov 2019
- Working Paper Summaries
Shareholder Activism and Firms’ Voluntary Disclosure of Climate Change Risks
Shareholder resolutions typically fail, and often by a wide margin. So why do active investors bother? It turns out that resolutions nonetheless can influence corporate transparency. Specifically, after being targeted with shareholder resolutions on environmental topics, this research shows that companies are more likely to publicly disclose their climate change risks—and that such disclosure increases these companies’ valuation.
- 23 Oct 2019
- Working Paper Summaries
Decarbonization Factors
This paper contributes to a growing knowledge base about how climate change impacts investor expectations, capital allocations and thereby pricing and returns. It provides actionable insights into how to decarbonize portfolios and evaluate the likely performance and carbon exposure differences across strategies.
- 20 Aug 2019
- Cold Call Podcast
Should a Pension Fund Try to Change the World?
Can inclusivity, sustainability, and better governance boost economies? Rebecca Henderson and George Serafeim discuss the impact investing efforts of GPIF, Japan’s government pension fund. Open for comment; Comment(s) posted.
- 10 Jun 2019
- Working Paper Summaries
Going Digital: Implications for Firm Value and Performance
More and more nontechnology companies are adopting digital technologies like AI, data analytics, and machine learning. This study of the economic performance of nontech firms adopting new digital technologies finds a persistent future increase in valuation. However, investors only slowly incorporate the value implications of digital activities into prices. Nontech companies with senior executives with tech talent improve performance more than those without.
- 07 Jun 2019
- Working Paper Summaries
Reflexivity in Credit Markets
Investors’ biases and market outcomes affect each other in a two-way feedback loop. This study develops a model of a credit market feedback loop, finding that when investors become more bullish this can predict positive returns in the short run, even if expected returns become more negative at longer horizons.
- 20 May 2019
- Research & Ideas
Activist CEOs Are Rising Up—and Their Customers Are Listening
Are product sales affected by the CEO's stance on political and social issues? Michael Toffel and Aaron Chatterji study how consumers react to vocal chief executives. Open for comment; Comment(s) posted.
- 18 Feb 2019
- Working Paper Summaries
Diagnostic Bubbles
The financial crisis of 2007-2008 revived academic interest in price bubbles but many conceptual questions remain open. This paper generates insights into the structure of asset price bubbles by modeling beliefs from fundamental psychological assumptions, and combining this with standard neoclassical mechanisms, such as learning from prices and speculation.
- 29 Jan 2019
- Research & Ideas
'Green Bonds' May Be Our Best Bet for Environmental Damage Control
The popularity of green bonds as a way to finance environmentally friendly projects is on the upswing, say Malcolm Baker and George Serafeim. Open for comment; Comment(s) posted.
- 03 Dec 2018
- Research & Ideas
How Companies Can Increase Market Rewards for Sustainability Efforts
There is a connection between public sentiment about a company and how the market rewards its corporate social performance, according to George Serafeim. Is your company undervalued? Open for comment; Comment(s) posted.
- 15 Nov 2018
- Working Paper Summaries
Do Fire Sales Create Externalities?
This paper contributes to our understanding of the role of large institutional investors in securities markets, providing evidence that the structure of the mutual fund industry increases the risks of costly "fire sales."
- 29 Oct 2018
- Working Paper Summaries
Public Sentiment and the Price of Corporate Sustainability
Public opinions from industry experts are important in the economy but it has not been clear how they affect the valuation of and returns to corporate activities. Using big data and machine learning, this paper analyzes how public sentiment influences the market pricing of firms’ sustainability activities and thereby the future stock returns of portfolios that integrate environmental, social, and governance data.
- 11 Sep 2018
- Working Paper Summaries
IQ from IP: Simplifying Search in Portfolio Choice
Mutual fund managers solve their complex “search problem” for superior investable returns by tracking—and trading—on very particular sets of firms and insiders. These sets are chosen strategically and remain very persistent over time, as does the outperformance these insiders’ trades afford to the given fund managers.
- 04 Sep 2018
- Working Paper Summaries
Investing Outside the Box: Evidence from Alternative Vehicles in Private Capital
Private equity vehicles that differ from the traditional structure have become a major portion of investors’ portfolios, especially over the past decade. This study identifies differences in performance across limited and general partners participating in such vehicles, as well as across the two broad classes of alternative vehicles.
- 02 Apr 2018
- Research & Ideas
Is 'Gut Feel' a Good Reason to Invest in a Startup?
Most investments in startups should never be made, at least when using by-the-numbers reasoning. But funded they are. Laura Huang believes investors use gut instinct to manage that risk. Open for comment; Comment(s) posted.
- 31 Mar 2018
- Working Paper Summaries
Expected Stock Returns Worldwide: A Log-Linear Present-Value Approach
Over the last 20 years, shortcomings of classical asset-pricing models have motivated research in developing alternative methods for measuring ex ante expected stock returns. This study evaluates the main paradigms for deriving firm-level expected return proxies (ERPs) and proposes a new framework for estimating them.
- 09 Feb 2018
- Working Paper Summaries
Developing Novel Drugs
This paper contributes to our understanding of how financing constraints affect the direction of innovation in drug development. The authors develop a new measure of drug novelty based on molecular characteristics, and explore the tradeoffs involved in decisions to develop more novel therapies. Open for comment; Comment(s) posted.
- 31 Oct 2017
- Working Paper Summaries
Mutual Funds as Venture Capitalists? Evidence from Unicorns
Larger mutual funds and those having more stable funding are more likely to invest in privately held startups known as unicorns. Mutual funds are less involved in corporate governance, especially boards of directors, but have more protections when it comes to liquidating their stakes.
- 02 Oct 2017
- What Do You Think?
Do Bitcoin and Digital Currency Have a Future?
SUMMING UP Bitcoin has shown to be a powerful digital currency, but the real story of the future is Blockchain, say James Heskett's readers. Open for comment; Comment(s) posted.
- 21 Sep 2017
- Cold Call Podcast
State Street’s SHE: Investing in Women Leaders
As investors increasingly demand investment opportunities that match their social beliefs, financial services firms are busy designing new products. In this podcast, Vikram Gandhi discusses the expanding influence of impact investing and how State Street Global Advisers is responding. Open for comment; Comment(s) posted.
Why CalSTRS Chooses to Engage with the Gun Industry
Should large institutional investors divest or engage if they have an issue with a company? In a recent case study, Vikram Gandhi discusses how CalSTRS, the $200 billion pension plan for California public school teachers, chose to engage with gun makers and retailers. Open for comment; Comment(s) posted.