Blogs & Comment

What the scholars are saying (III)

Finance professors around the world publish dozens of papers every month on investing and personal-finance topics. Below are some brief summaries of recent papers that I found of interest. This is the third installment in the series, which began Sept 30.
1. Short Sellers and Financial Misconduct,by Jonathan M. Karpoff and Xiaoxia Lou, reveals that a steady increase in short selling of a stock tends to anticipate thediscovery and severity of misrepresentation in financial statements.
2. Should Investors Follow the Prophets or the Bears?,by Michael Drake, Lynn Rees and Edward Swanson, finds investors do well i) buying stocks with highly unfavorable analyst recommendations but low short interest and ii) shorting stocks with highly favorable analyst recommendations but high short interest.
3. On the Ehrlich-Simon bet: Both were unskilled and Simon was lucky, by Philip Lawn, argues economist Julian Simon displayed luck, not skill, in winning the famous 1980 bet over resource scarcity withPaul Ehrlich (author of The Population Bomb) because real prices for the selected commodities fell for reasons other than those given by Simon.
4. Institutional Trade Persistence and Long-Term Equity Returns, by Amil Dasgupta, Andrea Prat, and Michela Verardo, uncovers evidence that stocks persistently sold by institutions outperform over the long runthe ones persistently bought by institutions, especially in the cases of smaller caps and high institutional ownership
5. Corporate Governance, Product Market Competition, and Equity Prices,by Xavier Giroud and Holger M. Mueller, concludes firms with weak corporate governance have lower equity returns — but only in non-competitive industries, where theyare more likely to be targeted by activist hedge funds.
Next Post in Series: What the scholars are saying (IV)
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