A finance researcher has a unique ability to either implement or publish interesting and useful findings. If you have a sufficient reputation and access to capital, you should keep any findings to yourself. If you have no access to capital and want to build a reputation, you publish anomalies. This implies that for an older finance scholar of sufficient reputation, anything they publish will be boring because if it was truly of practical importance they could and would have funded its exploitation.
From a new paper by Colbrin Wright posted at the SSRN:
From a new paper by Colbrin Wright posted at the SSRN:
The theory predicts that researchers with few (many) publications and lesser (stronger) reputations have the highest (lowest) incentive to publish market anomalies. Employing probit models, simple OLS regressions, and principal component analysis, I show that (a) market anomalies are more likely to be published by researchers with fewer previous publications and who have been in the field for a shorter period of time and (b) the profitability of published market anomalies is inversely related to the common factor spanning the number of publications the author has and the number of years that have elapsed since the professor earned his Ph.D. The empirical results suggest that the probability of publishing an anomaly and the profitability of anomalies that are published are inversely related to the reputation of the authors.
HedgeFundGuy - am 2007-01-11 21:09
James Miller (anonymous) meinte am 11. Jan, 22:48:
This implies that finance journals are better than hedge funds at determining if a finance researcher really has found an anomaly. Why would hedge funds need to rely on reputations more than finance journals do to determine if a researcher has really found an anomaly?
HedgeFundGuy antwortete am 11. Jan, 23:33:
I would say that's true.
Hedge funds are much more dependent on recommendations and pedigree, than academics (though it still is important in academics). If you are from Goldman Sachs and worked in a successful group, you can probably get capital regardless of your idea because of the reflected glory of your old colleagues. If you have a great idea, but figured it out in your basement, are currently getting a phd at Iowa State University, with no publications, it is improbable you will get any money for your idea. Sure there are exceptions, but the guys at the Journal of Finance are more discerning than the guys at Citadel when it comes to ideas from nobodies (not that I would give money to the editors of the Journal of Finance).
MrM (anonymous) antwortete am 12. Jan, 13:20:
The cost of making a mistake is low for journals: Unless a journal publishes too many plain stupid articles, wrong results will be associated with those who published them and not with the journal itself. Furthermore, publishing an article with wrong results could be net positive as it might stimulate further research.On the other hand, hedge funds are much more risk averse, especially when their priors have to be based on recommendations and pedigree without first-hand knowledge of a person
