Blogs & Comment

What the scholars are saying

Academia produces a steady outflow of studies on investing and personal finance topics. The math and jargon scares many people off, which is unfortunate because there are often some interesting ideas to consider, like the ones on index investing in this paper.
I have a quantitative background myself, so often go browsing through the journals and working papers to glean some new perspectives and insights. Below are some brief summaries of recent papers that I found of interest. Im thinking about doing this on a regular basis, approximately every two weeks or so.
1. Ageing and Asset Prices, by Elod Takats, finds demographic factors have affected real house prices significantly. His model projects ageing will lower real house prices substantially over the next forty years.
2. Intermediated Investment Management, by Neal M. Stoughton, Youchang Wu and Josef Zechner, looks at how financial advisors and the financial industry are impacted by trailer fees. A common interpretation is that these fees are payments for financial-planning services, but the authors find they are better understood as tools for aggressive marketing by portfolio managers (and forprice discrimination).
3. Linking Self-Esteem with the Tendency to Engage in Financial Planning, by Florence Neymotin, discovers a strong positive link between self-esteem and an individuals decision to engage in financial planning. Better self-esteem leads to better financial planning, it seems.
4. Diversification and its Discontents: Idiosyncratic and Entrepreneurial Risk in the Quest for Social Status, by Nikolai L. Roussanov, finds a link between social status needs and the share of risky assets inportfolios those wanting to get ahead of the Jones tend to have higher concentrations in risky investments and encounter greater volatility.
5. Do Individual Investors Have Asymmetric Information Based on Work Experience?by Trond M. Dskeland and Hans K. Hvide, examines the tendency of investors to overweight stocks in the industry they work in (11% in the case of Norwegian investors). Finding these holdings (shares in employer were excluded) underperformed the market, the authors conclude that the ill-advised concentration of risk across human-capital and financial assets does not reflect an information edge but overconfidence.
The next installament in the ongoing roundup of papers on investing and personal financewas released October 8.