James Choi, Adriana Z. Robertson, 21 October 2018

Economists typically try to infer investors’ motives and beliefs by observing prices, quantities, and choices, but the lack of randomised experiments makes drawing convincing conclusions difficult. This column presents the findings from a different approach – directly asking investors about their motives and beliefs. Rather than a small number of dominant factors, it finds substantial support for many of the leading theories of what drives portfolio equity shares.

Ina Simonovska, Joel David, 26 August 2016

The ‘excess co-movement puzzle’ in financial markets refers to the correlation of asset returns beyond what could be expected based on the common movements in fundamentals. Using international data, this column links excess co-movement in firm-level stock returns to the correlated beliefs of sophisticated investors. Co-movement is largely explained by investors’ reliance on common information – in other words, their lack of firm-specific information. This gives rise, in part, to the higher degree of aggregate market-wide volatility.

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