Popularity: A Bridge Between Classical and Behavioral Finance


This session from the 72nd CFA Institute Annual Conference is based on the CFA Institute Research Foundation book, Popularity: A Bridge between Classical and Behavioral Finance. Roger G. Ibbotson discusses:

  • “popularity,” or how much a security is liked, apart from the fundamentals: The more investors like it, the higher the price but the lower the expected return.
  • a new approach to asset pricing: the popularity asset pricing model (PAPM), which builds on the CAPM but includes additional investor preferences beyond risk aversion, such as liquidity and brand preference. These specific preferences are aggregated into security prices and are not arbitraged away.
  • that preferences can be rational (classical) or emotional (behavioral), so the PAPM provides a bridge between classical and behavioral finance.

Behavioral Finance Compared to Efficient Markets

Christopher Malloy is the Sylvan C. Coleman Chaired Professor of Financial Management in the Finance Unit at Harvard Business School, and a Research Associate at the National Bureau of Economic Research. His research focuses on topics in behavioral finance, asset pricing, investments, fintech, family office management, labor economics, and empirical corporate finance. His research has appeared in the Journal of Political Economy, the Journal of Finance, the Journal of Financial Economics, and the Review of Financial Studies, and has been described in The Financial Times, The Wall Street Journal, The New York Times, and various other media outlets.

The Value of Everything in an Unstable Environment with Aswath Damodaran

The Value of Everything in an Unstable Environment

Aswath Damodaran


In this session from the 73rd Annual Virtual Conference, Aswath Damodaran considers valuation principles in light of the COVID-19 crisis:

  • Valuation-first principles have not changed just because of the crisis, but investors have to be willing not only to make estimates about the damage that the crisis will cause to corporate earnings but also to think about what a company will look like in the post-coronavirus economy.
  • If you are tempted to use multiples and pricing because you don’t want to make assumptions in the face of uncertainty, you will find uncertainty affecting you in different ways, with trailing numbers moving dramatically and multiples becoming either not meaningful or not usable.
  • Difficult times require dynamic models, where forecasts of the past are not anchored in past numbers. In other words, mechanical models (which is what many DCF models have become in practice) will yield strange-looking numbers.
  • Ultimately, crises are crucibles that test investor faith and philosophies, and this crisis will be the acid test for active investing, in general, and value investing, in particular.

ETFs and Systemic Risks During Market Stress

ETFs and Systemic Risks During Market Stress
Maureen O’HaraJoanne M. HillPhD

The innovative structure of Exchange-Traded Funds (ETFs) has made it simpler and cheaper to invest in a wide variety of asset classes, but what does their growing importance mean for market stability, liquidity, and performance?

In this webinar, Professor Maureen O’Hara — co-author of the CFA Institute Research Foundation brief on ETFs and Systemic Risks — will examine the effects of ETFs on systemic risks in financial markets, with a special focus on the current market disruption from COVID-19. She will also explore the regulations, rules, and mechanisms in place to help mitigate risk. Hear Professor O’Hara’s perspective on what other rules are needed, and which rules need to be eliminated, to further reduce risks and support market stability.

Navigating Market Uncertainty

Everybody gets affected by uncertainty. It may be different things to different people, but uncertainty can be scary. 

We want to be that safe harbor that you can pull into and make sure everything is ok.  It is part of our responsibility.
You might not need anything changed. Your plan might be perfectly on track.  But sometimes, there are good course correction to be made. 

What we want to do is find the space and time to process the anxiety, to get the monkey off your back.
Often, that is just having a conversation about your plan; the why, what, and how.