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Dimensions of Popularity

TedTed
in Off-Topic
FYI: Popularity is a broad concept that can help explain valuation and the permanent market premiums (for example, the equity risk premium, size, value, liquidity, and so on). Liquidity is popular, whereas risk is unpopular. The authors explain how popularity can also help explain temporary mispricing (for example, stocks that the market gets overly excited about). In general, the less popular a security, the lower the valuation but the higher the expected return.
Regards,
Ted
http://www.iijournals.com/doi/pdfplus/10.3905/jpm.2014.40.5.068

Comments

  • Tampabay
    edited February 2015
    ''Mispricing impacts shorter term returns but not necessarily long-term returns."
    Wrong, mispricing is one of the main reasons for Long term returns, Buffett has made Giant profits from buying companies Mispriced...

    "Popularity is a key concept that helps to explain valuation as well as long and
    short-run returns."
    Agree, but media plays a major role in creating Popularity examples: Amazon, Tesla, Apple all get pumped in the media...... Mcdonalds, GE, Walmart get Dumped on,
    and prices reflect their perception by the media and Popularity by the public
  • Tony
    I didn't read the whole article, but its theme reminds me of something I once read which went something like this: The best investments are found not in the glare of spotlights, but hiding in dark corners.
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