RT Journal Article
SR Electronic
T1 Popularity and Asset Pricing
JF The Journal of Investing
FD Institutional Investor Journals
SP 46
OP 56
DO 10.3905/joi.2017.26.1.046
VO 26
IS 1
A1 Thomas M. Idzorek
A1 Roger G. Ibbotson
YR 2017
UL https://pm-research.com/content/26/1/46.abstract
AB Less-popular securities have lower prices but higher expected returns. In the efficient market framework, this is usually a risk that is disliked. Behavior finance posits numerous investor biases (e.g., affect) under which prices are determined by emotional sentiment. Popularity unifies both approaches by pricing security characteristics according to how much they are rationally or irrationally (emotionally) liked. Characteristics that are relatively permanently disliked result in pricing discounts and return premiums. A linear, popularity-based pricing equation is suggested.TOPICS: Security analysis and valuation, portfolio theory