Tue, Oct 17, 2017
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Alternative Market Briefing

Other Voices: The role of psychology, governance and skills in capturing longer term returns

Friday, May 16, 2014

amb
Dr. Vinay Nair
This article was authored by Dr. Vinay Nair, Founder and CEO of Ada Investments, an equities-based investment platform with offices in New York, Mumbai and Rio de Janeiro. Prior to becoming an investment manager, Dr. Nair was an Assistant Professor of Finance at The Wharton School, where he is now a visiting professor.

In all walks of life, for everyone, time is a significant constraint. This fact plays out in markets as well. Longer-term investment ideas get lesser attention than the ones that provide faster results and gratification. It is well known that, given two similar rewards, humans show a preference for one that arrives sooner rather than later. The neo-classical model of discounting future payoffs is however systematically violated. Consider two separate sets of choices.

a) What would you pick between $100 today or $125 next year?

b) What would you pick between $100 in five years or $125 in six years?

It turns out majority of us pick a faster payoff in choice (a) but are ok with a later payoff in choice (b). A growing literature on hyperbolic discounting highlights this inconsistency. Interestingly, among longer term ideas, this phenomenon might create a zone of unexplored opportunities in the medium term.

The inv......................

To view our full article Click here

Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing

 



  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Regulatory - David Stockman: Trump tax reform overhaul is a pipe dream, stocks are heading for 40-70% plunge, Carried interest tax: How much does it matter?, Odey sees 'terrifying' mix in MiFID, tapering, asset values, Hedge funds come together to share cost of MiFID and research, SEC turns up the heat on U.S. investment advisers, India's Sebi asks hedge funds to report investments in commodity derivatives[more]

    David Stockman: Trump tax reform overhaul is a pipe dream, stocks are heading for 40-70% plunge From CNBC.com: David Stockman is warning about the Trump administration's tax overhaul plan, Federal Reserve policy, saying they could play into a severe stock market sell-off. Stockman, the R

  2. North America - Puerto Rico rejects loan offers, accusing hedge funds of trying to profit off hurricanes[more]

    From TheIintercept.com: Puerto Rico has rejected a bondholder group's offer to issue the territory additional debt as a response to the devastation of Hurricane Maria. Officials with Puerto Rico's Fiscal Agency and Financial Advisory Authority said the offer was "not viable" and would harm the islan

  3. Investing - WPP targeted by short-selling American hedge fund, Sun co-founder sells secretive hedge fund on big chip trade[more]

    WPP targeted by short-selling American hedge fund From Cityam.com: An American hedge fund has mounted a bet against WPP, the world's largest advertising group, with a trade worth almost £90m. Lone Pine Capital has built a short position worth 0.51 per cent of the FTSE 100 company,

  4. Hedge funds up as industry adjusts to rising rates[more]

    Komfie Manalo, Opalesque Asia: Hedge funds have reshuffled their portfolio after nearly four weeks of rising rates as the Lyxor Hedge Fund Index was up +0.2% from 19 September to 26 (+1.1% YTD), fuelled by strong results of global macro funds, Lyxor Ass

  5. Manager Profile - How the world's hedge fund king used 'idea meritocracy' to become a billionaire[more]

    From Forbes.com: In 1982, Ray Dalio made what he calls the biggest mistake of his life. He made a bet that there would be an economic collapse stemming from a debt crisis. And he was wrong. He lost money. He lost his client's money. He had to let people go from his firm and borrow money from his dad