Professor Samuel Hartzmark: Asset Pricing, Behavioural Finance, and Sustainability Rankings

Professor Samuel Hartzmark: Asset Pricing, Behavioural Finance, and Sustainability Rankings | RR 273

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Күн бұрын

Today’s episode is an exhilarating journey into the captivating realms of finance and human behaviour with Professor Samuel Hartzmark, who takes centre stage to explore the complex intersection of asset pricing and behavioural finance. Professor Hartzmark’s career and academic journey are nothing short of inspiring. With a double major in mathematics and
economics, a prestigious MBA from the University of Chicago Booth School of Business, and a Ph.D. from the University of Southern California's Marshall School of Business, he has paved a remarkable path through the world of academia. Our conversation takes a deep dive into his groundbreaking research, where he dissects complex financial topics with astonishing clarity. We delve into some of his most-cited papers, including those on dividends and sustainable investing, which consistently reveal counterintuitive conclusions that challenge conventional wisdom. We unpack price-only index returns, dividend juicing, price-only data, the value of sustainability rankings, and the power of capital to make the world a better place. And don't miss our exploration of multi-factor asset pricing, where Samuel’s unique perspective sheds new light on these models in the context of human behaviour. This episode promises an enlightening and engaging conversation that investors and finance enthusiasts alike won't want to miss!
Timestamps:
0:00:00 Intro
0:04:12 How Morningstar’s Sustainability Rating system works
0:08:24 How important to flows the Globe Ratings were relative to more detailed information
0:11:06 What motivated investors to allocate toward funds with higher Globe Ratings
0:18:28 What Sam's findings tell us about what mutual fund investors care about
0:23:30 Sam defines “impact elasticity” in his research
0:26:36 How the impact elasticities of brown and green firms differ empirically
0:30:35 How effective divestment is at incentivizing brown firms to turn green
0:33:22 Where investors who want to have a positive impact on global sustainability should be allocating their capital
0:38:09 How investors treat price returns and dividends differently
0:40:54 What causes people to believe that dividends are special
0:45:15 Sam clarifies if dividends are a safe hedge against uncertain fluctuations in price
0:46:38 How Victor and James forecast volatility for determining the optimal risky share
0:51:42 When the demand for dividends is highest
0:55:44 How mutual funds exploit the preference for dividends
1:01:49 Sam's final words of wisdom on dividends
1:05:36 Why price indexes are so commonly used as a reference
1:11:58 How the prevalence of price-only index data affects investors’ return expectations
1:15:36 The textbook theoretical explanation for why some assets have higher expected returns than others
1:21:46 What Sam's survey results tell us about asset pricing
1:24:19 What the implications for people pursuing higher expected returns through factor investing are
1:31:07 Sam defines success in his life
Links From Today’s Episode:
Professor Samuel Hartzmark - www.samhartzmark.com/
Professor Samuel Hartzmark Email - samuel.hartzmark@bc.edu
Professor Samuel Hartzmark on X - / samhartzmark
Professor Samuel Hartzmark on LinkedIn - / sam-hartzmark-
b21bb127/
Professor Samuel Hartzmark on Google Scholar - scholar.google.com/citations
Boston College - www.bc.edu/
Morningstar - www.morningstar.com/
Sustainalytics - www.sustainalytics.com/
Episode 192: Professor Alex Edmans - rationalreminder.ca/podcast/192
‘Counterproductive Sustainable Investing: The Impact Elasticity of Brown and Green Firms’ -
dx.doi.org/10.2139/ssrn.4359282
‘Do Investors Value Sustainability? A Natural Experiment Examining Ranking and Fund
Flows’ - dx.doi.org/10.2139/ssrn.3016092
Travelers Insurance - www.travelers.com/
‘Reconsidering Returns’ - dx.doi.org/10.2139/ssrn.3039507
‘A New Test Of Risk Factor Relevance’ - dx.doi.org/10.2139/ssrn.3487624
Rational Reminder on iTunes - itunes.apple.com/ca/podcast/t...
podcast/id1426530582.
Rational Reminder Website - rationalreminder.ca/
Rational Reminder on Instagram - / rationalreminder
Rational Reminder on X - / rationalremind
Rational Reminder on KZfaq - / channel
Rational Reminder Email - info@rationalreminder.ca
Benjamin Felix - www.pwlcapital.com/author/ben...
Benjamin on X - / benjaminwfelix
Benjamin on LinkedIn - / benjaminwfelix
Cameron Passmore - www.pwlcapital.com/profile/ca...
Cameron on X - / cameronpassmore
Cameron on LinkedIn - / cameronpassmore

Пікірлер: 18

@davidfolts5893 9 ай бұрын

It is one of the best financial KZfaq channels with intelligent and savvy commentary. Thanks, gentlemen!

@andrewfriedrichs9340 9 ай бұрын

I don't mind ESG as a concept, but it seems designed to make investors FEEL better not actually do anything. I think a case study on how investor sentiment affected tobacco companies would be insightful.

@thomas6502 9 ай бұрын

Thank you again for another great discussion!

@pavlosaikevych 8 ай бұрын

What if in some countries there are tax benefits for dividends? For example in my country we have flat rate 9% for dividends and 18% if sell

@shawzyd736 8 ай бұрын

2023 QDI tax rate is 0% in the $0 - $89,250 MFJ bracket while interest income is taxed as ordinary income. QDI can come in handy in some instances if one is early retired, etc.

@rui569 8 ай бұрын

I WAS fooled by dividends. Thank you for that.

@stevenbrady440 5 ай бұрын

I would be curious whether there is some corruption in the industry or advertisers on the total returns reporting question. Who benefits? Not including dividends isn't correct. Same for not including capital gains.

@a.j.4644 9 ай бұрын

At 55 minutes in, i find it interesting that you only discussed one half of the dividend demand cycle. If low interest rates drive up demand for dividend stocks, and that demand raises prices to the point that it lowers returns, then does it follow that high interest rates drive down demand for dividend stocks (something we've witnessed in 2023 so far), and that clobbers proces for them to the point that they have higher returns in that part of the cycle? I also wish you guys and your guests would clearly, explicitly, unequivocally state whether you think investors should be dividend neutral, meaning don't let it affect your understanding of the firm's fundamentals and its total returns OR are you saying investors should be divided negative, which is how you often come off, laughing at various "dividend fallacies," and avoid stocks that pay dividends?

@pizzaguy552 9 ай бұрын

Previous CSI videos make it pretty clear to me they are divided neutral.

@a.j.4644 9 ай бұрын

@@pizzaguy552 I consider that a fair conclusion, but I think it's important to reaffirm the central premise of neutrality if you are going to spend So Much Time saying negative things. I would understand if someone watched a video like this and then had misgivings about investing in a stock that ticks all sorts of important boxes for them in terms of its soundness, P/E ratio, management, future returns, etc, but--oh, no!--it pays a dividend. I also would tell them, their guests, and commenters here that if you are trying to change the mind of a dividend investor, things like laughing and calling them "emotional" to their faces or "behind their backs" (like by assuming that no such person is watching this video) is not going to help your case (or your relationship with them in general).

@rationalreminder 8 ай бұрын

Good feedback. Thanks. We are definitely not saying that dividends should be avoided. Just that they are not relevant to returns or expected returns. -Ben

@TheBlawdfire 8 ай бұрын

fwiw, I came away from that segment with a pretty clear conclusion that the hosts and Hartzmark had a neutral perspective on dividends. They clearly laid out the factual pros/cons, examples for why an investor might want to pursue or avoid dividends in their portfolio, and had a discussion about the common emotion-driven fallacies that trap many investors. Was a good and fair segment in my view and focusing on the humor around some common misunderstandings seems like an emotional conclusion

@christianbaygin2131 8 ай бұрын

For dividends, one thing I have a hard time getting my head around is what exactly makes the price of the stock change once the dividend is paid out. The price of a stock doesn’t necessarily reflect the value of the company’s assets, the price is decided by the market buyers and sellers. So does it mean, once the dividend gets paid, that a lot of people start selling that stock and therefore the price goes down?

@pradyumnacalisa3770 8 ай бұрын

How I understood it is that the discounted value of the expected dividend is part of the stock price, once the ex-dividend date is reached and the dividend is paid out, the stock usually falls by the price of the dividend value per share.

@paulmaartin 8 ай бұрын

Dividend capture is a thing.

@TheSteinbitt 8 ай бұрын

If a company suddenly starts giving away cash to people, you wouldn’t be surprised that stock is declining.

@matthewsmith5104 5 ай бұрын

The actual market mechanism is rather simple. If the price didn't drop by the amount of the dividend, then the dividend would be essentially free money. There would be a kind of arbitrage strategy where you could purchase the stock on the ex-dividend date and sell it the following day, capturing the full dividend while only exposing yourself to 1 trading day of price moment. If this were a sustainable strategy, people would start doing it. The buy pressure before the dividend would push the price up, and the sell pressure after the dividend would push the price down, until that 'arbitrage' was squeezed down to zero, effectively enforcing the price dropping by the amount of the dividend.