There’s more information available to equity investors today than ever before. You might think that this would make markets more transparent, efficient and rational.
Think again. Markets are as emotional as ever—and maybe even more so. Our research shows that stocks have been reacting more sharply to earnings surprises since 2000 than they did in the previous 14 years (Display).
Behavioral biases have intensified in our short-tempered world. Yet naïve investing approaches aimed at finding attractively valued stocks cannot take advantage of these dislocations. Research, human judgment and patience are necessary to untangle the oft-conflicting signals. In this paper, we present recent and historical case studies to demon¬strate why the classic principles of value investing are especially relevant today, when it has become harder than ever to sift through market noise and focus on fundamental drivers of earnings and stock returns.
Emotional Stock Market Reactions Persist
US Stock Price Reaction to Extreme Information Shocks During Earnings Announcements
