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Article: Offsetting Disagreement and Security Prices

TitleOffsetting Disagreement and Security Prices
Authors
KeywordsInvestor Disagreement
Belief-Crossing
Portfolio Discounts
Issue Date2012
PublisherINFORMS. The Journal's web site is located at http://mansci.pubs.informs.org
Citation
Management Science, 2020, Epub 2020-03-18 How to Cite?
AbstractWe propose that investor beliefs frequently “cross” in the sense that an investor may like company A, but dislike company B, while another investor may like company B, but dislike company A. Belief-crossing makes it almost impossible to construct a portfolio that is comprised solely of every investor’s most favorite companies. This causes the level of excitement for portfolios to be generally less than the levels of excitement that individual companies receive from their most fervent supporters. Coupled with short-sale constraints, wherein prices are set by the most optimistic investors, this causes portfolios to trade at discounts. Utilizing various settings where the value of the portfolio and the values of the underlying components can be separately evaluated (e.g., closed-end funds), we present evidence supporting our proposition that, in financial markets, the “whole” is often less than the “sum of its parts.”
Persistent Identifierhttp://hdl.handle.net/10722/274547
ISSN
2017 Impact Factor: 3.544
2015 SCImago Journal Rankings: 4.384
SSRN

 

DC FieldValueLanguage
dc.contributor.authorHuang, S-
dc.contributor.authorHwang, B-H-
dc.contributor.authorLou, D-
dc.contributor.authorYin, C-
dc.date.accessioned2019-08-18T15:03:54Z-
dc.date.available2019-08-18T15:03:54Z-
dc.date.issued2012-
dc.identifier.citationManagement Science, 2020, Epub 2020-03-18-
dc.identifier.issn0025-1909-
dc.identifier.urihttp://hdl.handle.net/10722/274547-
dc.description.abstractWe propose that investor beliefs frequently “cross” in the sense that an investor may like company A, but dislike company B, while another investor may like company B, but dislike company A. Belief-crossing makes it almost impossible to construct a portfolio that is comprised solely of every investor’s most favorite companies. This causes the level of excitement for portfolios to be generally less than the levels of excitement that individual companies receive from their most fervent supporters. Coupled with short-sale constraints, wherein prices are set by the most optimistic investors, this causes portfolios to trade at discounts. Utilizing various settings where the value of the portfolio and the values of the underlying components can be separately evaluated (e.g., closed-end funds), we present evidence supporting our proposition that, in financial markets, the “whole” is often less than the “sum of its parts.”-
dc.languageeng-
dc.publisherINFORMS. The Journal's web site is located at http://mansci.pubs.informs.org-
dc.relation.ispartofManagement Science-
dc.subjectInvestor Disagreement-
dc.subjectBelief-Crossing-
dc.subjectPortfolio Discounts-
dc.titleOffsetting Disagreement and Security Prices-
dc.typeArticle-
dc.identifier.emailHuang, S: huangsy@hku.hk-
dc.identifier.authorityHuang, S=rp02052-
dc.description.naturepostprint-
dc.identifier.doi10.1287/mnsc.2019.3380-
dc.identifier.hkuros301112-
dc.identifier.hkuros309548-
dc.identifier.volumeEpub 2020-03-18-
dc.publisher.placeUnited States-
dc.identifier.ssrn2389730-

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