October Newsletter

CQA Updates:

We have the results of the recent survey we sent out regarding the Chicago meeting. Thanks everyone who responded. See below for details.

As a reminder, CQA membership applications are due by November 30th. See information below, which you can forward to any potential CQA membership candidates.

Looking ahead, a small group of CQA members will be attending the ASSA meetings again this year in San Francisco. If you’ve never attended the event, I encourage you to check it out. We usually have a reception at the host hotel and invite CQA members and past academic speakers to attend. We’ve decided to change things up this year and just sponsor a small get-together on Friday evening for CQA members attending the conference and any others who are in town. If you’re going to be at the meetings or if you’re local, please register to make sure you get the details for the event.

-Dan Cardell

ASSA Annual Meeting

The ASSA 2025 Annual Meeting, happening in San Francisco, CA, from January 5-7, 2025, is the largest annual gathering of economists and finance professionals. Co-hosted by the American Economic Association, this event features over 500 sessions that highlight groundbreaking research across all areas of economics. It’s a must-attend for anyone looking to engage with the latest developments in the field, from academic discussions to policy debates. Attendees will have the opportunity to network with peers, connect with top researchers, and explore a dynamic job market during the conference. Click here for registration and event details.

ASSA Cocktail Reception

We’re excited to invite CQA members to a small cocktail reception on Friday evening, January 3rd, ahead of the ASSA meeting. It’s the perfect opportunity to connect with fellow attendees before the main event kicks off. We’d love to see you there! Be sure to register below to receive updates and event details.

Fall Conference Presentations

Click below to download.

Survey Results

We’d like to thank everyone who took the time to participate in last month’s survey about the Fall Conference. Your feedback helps us ensure that future events are as enjoyable and productive as possible. Overall, the responses showed a high level of satisfaction with the InterContinental Hotel, with many attendees appreciating the convenient location and venue. We’ve also received great suggestions and constructive comments on ways to enhance your experience, and we look forward to incorporating your insights as we plan for upcoming conferences!

Recommended Reads

Alex Muniz - Editor
Please contact Alex at amuniz@varetire.org

“Local-Thinking Bias”

This study examines local-thinking bias in sell-side analysts, where they overreact to news within their coverage portfolios while underreacting to news from economically linked firms outside their portfolios. The research shows that these biases lead to predictable return reversals, as market prices reflect the analysts’ overreactions. A trading strategy based on this effect yields significant abnormal returns, with implications for cognitive psychology, behavioral asset pricing, and analyst behavior.

Read

“(Almost) 200 Years of News-Based Economic Sentiment”

This paper introduces a 170-year-long measure of economic sentiment, developed using text from 200 million pages of 13,000 U.S. local newspapers and machine learning methods. The measure predicts GDP, consumption, and employment growth, even outperforming expert forecasts and influencing monetary policy decisions. Notably, the analysis reveals that news coverage has become more negative across all states over the past 50 years. This paper will be presented at the upcoming ASSA meeting in January.

Read

“Narrative Momentum”

This paper explores how investors underreact to economic narratives, using a large dataset of digital media sources since 2012 to quantify narrative intensities and construct narrative-mimicking portfolios. Portfolios tied to rising narrative intensities outperform those linked to declining intensities by about 8% annually, revealing the significance of narrative momentum beyond standard risk factors. A related paper, “Crash Narratives,” examines how "crash narratives" in the financial press shape investor behavior and market volatility. Additionally, Robert Shiller's book, Narrative Economics: How Stories Go Viral and Drive Major Economic Events, delves into how popular stories influence economic events and investor decisions.

Read

“When a Crystal Ball Isn’t Enough to Make You Rich”

This article describes "The Crystal Ball Challenge," an experiment where 118 finance-trained participants were given one day’s advance access to the Wall Street Journal front page, excluding stock and bond prices, and asked to trade based on this information. Despite their advantage, nearly half lost money, and one in six went bust due to poor market predictions and excessive leverage. In contrast, five experienced macro traders outperformed significantly, demonstrating that while predicting market direction is important, sensible trade-sizing is key to success.

Read

“Nonstandard Errors”

These researchers explore the concept of nonstandard errors (NSEs), which represent additional uncertainty in research results due to variation across researchers. By analyzing the outcomes from 164 teams testing the same hypotheses on identical data, the study finds that NSEs are significant, but smaller in more reproducible or peer-reviewed research. The authors also conclude that researchers often underestimate the level of this uncertainty.

Read

“Polling for Alpha: What Presidential Elections Signal for Quant Factors Through Time”

The article discusses how presidential elections influence market behavior and factor performance in quantitative investing. Historically, factors like Earnings Yield and Size have performed well under Republican administrations, while Momentum and Growth have thrived during Democratic leadership. The piece highlights that investors should pay attention to factors like Momentum and industries such as Biotechnology in the current election cycle due to expected volatility.

Read

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