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New research on investment return from Harvard Business School faculty on issues including how to allocate marketing resources to improve investment return, and how to better predict whether investing in a startup is likely to yield a strong return.
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Best Ideas

by Miguel Antón, Randolph B. Cohen, and Christopher Polk

The “best ideas” in investment managers’ portfolios generate statistically and economically significant risk-adjusted returns over time, and they systematically outperform other positions in the portfolios. Investors can gain substantially if managers choose less-diversified portfolios that tilt more towards their best ideas.

Market Investors Pay More for Resilient Companies

by Kristen Senz

During a market collapse, investors will pay up for companies considered resilient in their response, according to George Serafeim. Open for comment; 0 Comments.

Corporate Resilience and Response During COVID-19

by Alex Cheema-Fox, Bridget LaPerla, George Serafeim, and Hui (Stacie) Wang

Investors look for evidence during a market crisis that a company is resilient. This study includes findings that challenge the notion that companies need to adopt practices that hurt their employees because investors want them to do so.

How Social Entrepreneurs Can Increase Their Investment Impact

by Rachel Layne

Grants or investments? Philanthropic organizations have multiple funding tools available, but choosing the wrong one can dilute the benefits, according to research by Benjamin N. Roth. Open for comment; 0 Comments.

Going Digital: Implications for Firm Value and Performance

by Wilbur Chen and Suraj Srinivasan

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.

Public Sentiment and the Price of Corporate Sustainability

by George Serafeim

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.

Expected Stock Returns Worldwide: A Log-Linear Present-Value Approach

by Akash Chattopadhyay, Matthew R. Lyle, and Charles C.Y. Wang

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.

Governance Through Shame and Aspiration: Index Creation and Corporate Behavior in Japan

by Akash Chattopadhyay, Matthew D. Shaffer, and Charles C.Y. Wang

By exploiting the unique features of Japan’s JPX-Nikkei 400 index, this paper examines how membership in a stock index serves as a source of prestige that can motivate managers and influence corporate governance norms. Findings are important for understanding non-pecuniary mechanisms to induce meaningful changes in corporate behavior.

Why Global Investments Are Still a Good Bet

by Michael Blanding

International markets often move together, so does a global investment portfolio even make sense anymore? Luis Viceira still sees plenty of advantages in looking beyond home markets. Open for comment; 0 Comments.

Credit-Market Sentiment and the Business Cycle

by David Lopez-Salido, Jeremy C. Stein, and Egon Zakrajsek

Using United States data from 1929 to 2013, Jeremy C. Stein and colleagues emphasize the role of credit-market sentiment as an important driver of the business cycle.

How to Predict if a New Business Idea is Any Good

by Michael Blanding

Professor Pian Shu tackles one of the most difficult questions in the startup world: How can you tell if a new business will succeed? Open for comment; 0 Comments.

Allocating Marketing Resources

by Sunil Gupta & Thomas J. Steenburgh

Deciding how to allocate marketing resources is particularly difficult because decisions need to be made at many different levels—across countries, products, marketing mix elements, and different vehicles within elements of the mix (e.g., television versus the Internet for advertising). With the increasing availability of data and sophistication in methods, it is now possible to more judiciously allocate marketing resources. In this paper, HBS professors Gupta and Steenburgh discuss a two-stage process where a model of demand is estimated in stage-one and its estimates are used as inputs in an optimization model in stage-two. The researchers propose a matrix with three approaches for each of these two stages, and discuss the pros and cons of these methods. They highlight each method with applications and case studies to present rigorous yet practical approaches to making marketing resource allocation decisions. Key concepts include: This paper lays out a framework for managers who are responsible for allocating marketing resources for their products and services. Scores of studies in the area of allocating marketing resources now make it possible to form empirical generalizations about the impact of marketing actions on sales and profits. In practical terms, information about marketing resource allocation makes a significant impact at all levels of an organization. Closed for comment; 0 Comments.