- Validity, tightness, and forecasting power of risk premium boundsKerry Back, Kevin Crotty, and Seyed Mohammad KazempourJournal of Financial Economics 2022
Recent work uses option prices to derive lower bounds for the risk premia of the market portfolio and individual stocks. We test the bounds conditionally. We cannot reject that they are valid, but we do reject that they are tight. Using the market bounds as forecasts appears unreasonable in many cases due to their high slackness. Adding past mean slackness is a potential improvement but is hampered by the brevity of the available data series. The correlation of the stock bounds with subsequent returns stems primarily from the time series rather than the cross section.
- Disseminating Information on Twitter: Evidence from Investment AdvisersSeyed Mohammad KazempourApr 2023
I show that investment advisers disseminate valuable stock information on their Twitter accounts. A one standard deviation increase in the sentiment of their tweets predicts a 12 bps increase in abnormal returns over the next week. This informativeness is not a result of pump-and-dump strategies or ex-post window-dressing. Advisers’ tweets disseminate and interpret public news, especially analyst revisions and earnings announcements. Furthermore, they identify which recent trends in stock prices are fundamentally justified. Advisers offering financial planning services post more informative tweets. My results highlight the value of Twitter for connecting advisers and investors.
- FinfluencersAli Kakhbod, Seyed Mohammad Kazempour, Dmitry Livdan, and Norman SchürhoffApr 2023
Tweet-level data from a social media platform reveals low average accuracy and high dispersion in the quality of advice by financial influencers, or “finfluencers": 28% of finfluencers are skilled generating 2.6% monthly abnormal returns, 16% are unskilled, and 56% have negative skill (“antiskill”) generating -2.3% monthly abnormal returns. Consistent with homophily shaping finfluencers’ social networks, antiskilled have more followers and more influence on retail trading than skilled finfluencers. The advice by antiskilled finfluencers creates overly optimistic beliefs most times and persistent swings in followers’ belief bias. Consequently, finfluencers cause excessive trading and inefficient prices such that a contrarian strategy yields 1.2% monthly out-of-sample performance.
- Dynamic Disclosure GamesKerry Back, Bruce Carlin, Seyed Mohammad Kazempour, and Chloe XieJan 2021
We derive the effect of plausible deniability on asset risk premia in a dynamic setting with correlated firm values, systematic risk, and risk-averse investors. Firms optimally exercise American disclosure options, which are more valuable due to the possibility that other correlated firms may disclose high values, lifting investors’ perceptions of the values of nondisclosing firms. Risk premia rise (and average prices fall) prior to disclosures, because investors make inferences about aggregate risks from failures to disclose, resulting in higher state prices for bad states.
- Direct Investment and Intermediary Asset PricingSeyed Mohammad KazempourNov 2019
The wealth share of direct investors is priced in the cross-section of stocks and bonds. This is consistent with a theoretical model that expands the intermediary asset pricing model of He and Krishnamurthy (2013) to include households’ direct investment. Using total assets of mutual funds as a proxy for direct investment, I show that a portfolio mimicking my proxy for the share of direct investment has a price of -0.9% to -2.0% annually. My factor has explanatory power even in a two-factor model that also includes the intermediary capital ratio factor of He, Kelly, and Manela (2017).