We provide a theoretical basis for understanding the properties of compound returns. At long horizons, multiplicative compounding induces extreme positive skewness into individual stock returns, an effect primarily driven by single-period volatility. As a consequence, most individual stocks...

Sell-side analysts' forecasts of future stock returns are highly biased and the aggregated consensus forecast is a poor predictor of future returns. In sharp contrast, we show that the information revealed through the implicit ranking of return forecasts conducted individually by each analyst is...

At long horizons, multiplicative compounding induces strong-to-extreme positive skewness into stock returns; the magnitude of the effect is primarily determined by single-period volatility. Consequently, at horizons greater than five years, returns --individual or portfolio-- will be positively...

By running a battery of incentivized and non-incentivized experiments with fund managers from four countries in the European Union, we investigate the impact of fund managers' cognitive skills and economic preferences on the dynamics of the mutual funds they manage. First, we find that fund...