Professor Christopher Malloy (‘96 BA, Davenport College, Harvard Business School) will present a brief overview of the field of behavioral finance, and then an in-depth look at his most recent paper, entitled “Lazy Prices.” In his overview, Professor Malloy will summarize the advances of the past decade but also include some speculation about the most promising directions for the next decade, including social network analysis and the future of unstructured data.
As an example of current and future work in the field, his paper “Lazy Prices” explores the implications of a subtle “default” choice that firms make in their regular reporting practices, namely that firms typically repeat what they most recently reported. However, when firms make an active change in their reporting practices, this conveys an important signal about the firm. Changes to the language and construction of financial reports have strong predictive power for firms’ future stock returns: a portfolio that shorts “changers” and buys “non-changers” earns up to 188 basis points per month (over 22% per year) in abnormal returns in the future. Changes in language referring to the executive (CEO and CFO) team, or regarding litigation, are especially informative for future stock returns.
Event Details: Date: March 2, 2017 Time: 12:30 – 2:30pm Venue: Kiangsu Chekiang and Shanghai Residents (HK) Association Restaurant, 4/F Manning House, 38-48 Queen’s Road Central, Central Cost (includes lunch): HK$400 (Yale Club members); HK$500 (associates/guests)