FYI: Tuesday's column outlined a fresh hypothesis for how stock markets are priced. Popularity: A Bridge Between Classical and Behavioral Finance by Roger Ibbotson and Morningstar's Thomas Idzorek, Paul Kaplan, and James Xiong upends the usual perspective. In the authors' framework, as in classical finance, securities receive higher expected returns for shouldering more risk, all else being equal. However, risk is only one dimension of popularity (or unpopularity since risk is unpopular). In general, securities with desirable characteristics receive lower expected returns, and those with undesirable characteristics receive higher expected returns. The Popularity scheme counts down, not up.
Regards,
Ted
https://www.morningstar.com/articles/906550/do-more-popular-stocks-have-lower-returns.html
