The Year in Review 2012 summarizes the offerings from the Research Foundation of CFA Institute over the past year — monographs, literature reviews, workshop presentations, and other relevant material

To increase understanding of the real world of the fund manager, the authors apply principles from emotional finance. They report their findings from analysing in-depth interviews of 52 traditional and quantitative-oriented equity managers. In particular, they examine the importance of...

This paper investigates why the market fails to incorporate the adverse information conveyed by the going-concern (GC) opinion in a timely manner. Our main conjecture is that the lottery-like features of GC stocks attract a predominantly retail clientele who use those stocks to gamble in the...

Between June 2005 and October 2007, when it peaked, the Chinese stockmarket went up five-fold; it then went into freefall losing 70% of its value over the following year. Such a market price trajectory represents that of a classic stockmarket bubble. This paper seeks to explain what was going on...

This paper sets out to explore if standard psychoanalytic thinking based on clinical experience can illuminate instability in financial markets and its widespread human consequences. Buying, holding or selling financial assets in conditions of inherent uncertainty and ambiguity, it is argued,...

This paper asks whether the stocks of bankrupt firms are correctly priced, and explores who trades the stocks of these firms, and why. We show that firms in Chapter 11 are heavily traded by retail investors who are also their main shareholders. We further demonstrate that the stocks of these...

Bankrupt firms' stock displays unique lottery-like characteristics: for only a few cents per stock one can engage in an investment strategy that offers a low probability of huge future reward, and a very high probability of a small loss. Kumar (2009 a) shows that this type of stock is likely to...

Firms that file for Chapter 11 are actively traded. This paper investigates who trades these bankrupt firms and why. We also examine the potential pricing impact of this active trading. We find that the unique lottery-like characteristics of bankrupt firms make them attractive to a particular...

This study shows that investor preference for positively skewed payoffs is a common driver of mispricing across a wide range of market anomalies. Specifically, skewness-loving investors overweight overpriced stocks in their portfolios and in doing so contribute to the anomalies. Using a combined...