News

Matti Suominen's article was accepted to the Management Science

The name of the article is "Hedge Funds and Stock Market Efficiency"

Article "Hedge Funds and Stock Market Efficiency" by Joni Kokkonen (Catolica) and Matti Suominen has been accepted for publication in the Management Science.

Abstract:     

We measure misvaluation using the discounted residual income model. As shown in the literature, this measure of stocks’ misvaluation significantly explains their future cross-sectional returns. We measure the market level misvaluation (market inefficiency) by the misvaluation spread: the difference in the misvaluation of the most over- and undervalued shares. We show that the misvaluation spread is a strong predictor of a misvaluation based long-short portfolio’s returns, reinforcing the hypothesis that it proxies for the level of mispricing in the stock market. Using data on hedge fund returns, hedge fund industry AUM, flows, and individual hedge fund holdings, we present evidence that hedge funds’ trading reduces market level misvaluation. Our results are robust across different time periods and are not driven by market liquidity. Moreover, we find that mutual funds do not have a similar, price-correcting effect as hedge funds.

Paper can be downloaded at SSRN: http://ssrn.com/abstract=2133394

  • Published:
  • Updated:
Share
URL copied!

Read more news

Rulpa_Anna Aleksejeva in WantedDesign
Research & Art Published:

Wood Studio meets with success in WantedDesign New York

Aalto University takes part in the international WantedDesign online exhibition 2022. WantedDesign is a platform for creative talent, and it organises digital exhibitions featuring great design from around the world.
The design space in the virtual reality task
Press releases, Research & Art Published:

Designers find better solutions with computer assistance, but sacrifice creative touch

Computer-guided design can propose more solutions and balance out human inexperience and design fixation
A portrait of Maria Sammalkorpi.
Research & Art Published:

Ascending Investigator Grant from Novo Nordisk Foundation awarded to Maria Sammalkorpi for computational biosynthetic materials research

Senior Scientist Maria Sammalkorpi has been awarded the highly competed Ascending Investigator 2022 Grant from Novo Nordisk Foundation for a total of ca 9 million DKK (1.2M€).
Two models wearing grey solar cell clothing.
Research & Art Published:

Researchers developed invisible, machine-washable solar cell technology for clothing

The discrete nature of the cells protects them – and makes the clothes more attractive, the physics and design researchers say. Promising applications include work and outdoor clothing, and curtains which react to changes in the amount of light.