Blogs & Comment

What the scholars are saying (IV)

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 fourth installment in the series, which began Sept 30.
Index Investment and Financialization of Commodities, by Ke Tang and Wei Xiong, argues that growing investment in commodity index funds caused futures prices of different commodities in the U.S. to become increasingly correlated with each other and this financialization process is what explains the synchronized boom/bust of a broad set of seemingly unrelated commodities in 2006-2008 in the U.S. (as opposed to growing commodity demand from emerging economies)
The Financialization of Commodity Futures Markets or: How I Learned to Stop Worrying and Love the Index Funds, by Scott H. Irwin and Dwight R. Sanders, postulates that index funds did not distort commodity futures markets considering data problems in studies alleging such distortions and another group of studies that find no systematic evidence of a link.
Fiddling with Value: Violins as an Investment?, by Kathryn Graddy and Philip Margolis, finds that professional-quality violins have yielded nice steady investment returns regardless of economic conditions — prices at auctions and private dealers from 1980 onwards have gained an average 3.3% per year in real terms (fine violins made by masters like Stradivari and Amati have appreciated at much higher rates from 1850 to 2008).
Corporate Fraud and Business Conditions: Evidence from IPOs, by Andrew J. Winton, Tracy Wang and Xiaoyun Yu, uncovers evidence that regulators and auditors should be especially vigilant for fraud when firms go public during booms in the stock market.
Investments Across Cultures: Financial Attitudes of Chinese-Americans, by Jessica A. Weng and Meir Statman, conclude immigrant and first-generation Chinese-Americans are less willing to carry debt, more willing to invest in real estate, not as inclined to concentrate their investments in the U.S., no more risk tolerant and no more thrifty compared to the general American population.