Every investor claims to be independent. Every manager insists their ideas come from first principles and rigorous work. And yet, if you look closely, professional portfolios behave as if managers spend most of their time peering over each other’s shoulders. The evidence comes from a fascinating study by Harrison Hong, Jeffrey Kubik, and Jeremy Stein, […]

Many long-term investors claim to love volatility because it creates opportunity. This is usually said immediately after experiencing a large loss. It is a form of emotional self defense. Volatility is not good for buy and hold portfolios. It is the engine that drives drawdowns and extends the time you spend underwater. But at the […]

When you look at selling behavior in financial markets, the most robust empirical fact is familiar: people sell winners too quickly and hang on to losers too long. Traditional explanations lean heavily on prospect theory — loss aversion, an S-shaped value function, and so on. But a recent paper by Brettschneider, Bruno and Henderson prods […]

Markets are supposed to respond to information. New facts arrive, prices adjust, some bald man on CNBC opines and we all move on. But that tidy story assumes something big: that investors are always paying attention. Anyone who works with other people (or really just lives in the world) knows that in reality, attention is […]

When people talk about bubbles, the story is usually psychological. Investors get euphoric, abandon discipline, extrapolate recent returns, and eventually panic. This narrative goes back at least to Kindleberger’s Manias, Panics, and Crashes and remains the default explanation in both the media and policy circles. Even Eugene Fama, in his Nobel lecture, framed bubbles as […]