RESEARCH
My main research interests lie in investments and portfolio management, optimization and performance evaluation. I am also interested in, and have have ongoing projects, in the areas of empirical asset pricing and behavioral finance.
Selected Working Papers
Using trades inferred from Robinhood’s popularity data, we show that stocks that enter the trading platform's `100 Most Popular' list attract the attention of the app's users and experience a short period of high returns and trading volume. We further show that instead of this being pure noise, as coordinated retail trading has been characterized in the media and some previously published research, Robinhood investors contribute to the price discovery process of these securities, particularly in the case of small and micro stocks. With the rise of mechanisms that induce coordinated trading, such as social media and platforms like Robinhood and eToro, we show that these mechanisms can actually increase market efficiency, specially for securities often overlooked by larger investors.
Mutual fund competition and fund manager strategy choice
The increasing number of mutual funds and assets under management of the industry are credited with restricting opportunities and stifling incentives for fund managers to generate alpha. I show that some managers are able to adapt to the more competitive market environment by tilting their investment strategy towards 'quality'. Using the fund's loading on the QMJ factor to proxy for quality management, I find that high quality funds outperform their peers, and generate annual alphas of 2.88%. Besides peer competition, a clientele effect seems to influence the choice of strategy. Clients of high quality funds are more sophisticated and focus on risk-adjusted returns, while those of low quality funds fit the description of uninformed investors, and seem unresponsive to both gross returns and alphas.
Why does Skewness matter? Ask Kurtosis.
I investigate the relationship between measures of skewness and expected stock returns. Forcing the data to fit a linear model, past research finds only a negative relationship between these variables. Using a novel methodology that endogenously estimates breakpoints in the relationship between two variables, I find three distinct zone. Expected returns are decreasing in skewness, but only for a region of relatively low absolute values of skewness. For distributions which are highly left- or right-skewed, the relationship is actually positive. Moreover, I find that kurtosis plays a major role in mediating this relationship. Adding measures of the fourth moment to all models tested turns all skewness coefficients negative, and most statistically insignificant. Relying on probability theory, I provide a theoretical framework that supports all empirical findings.
A Cross-Country Study of Innovation and Religiosity
We look at the relationship between religion and innovation at the country level. Innovation is captured by the Global Innovation Index and certain innovation outputs. Religiosity is measured across 141 countries in terms of religious belonging, belief, and intolerance. In addition, we look at the effect of religion on patent applications and university-industry collaboration. Across all specifications, greater religiosity is negatively associated with innovation, with the strongest effects observed for religious intolerance. We find the negative relationship is robust to all religions, except for the Church of Sweden, where we see a strong position association.
Publications
‘Smart’ copycat mutual funds: on the performance of partial imitation strategies.
Financ Innov 8, 92 (2022)
"Are mutual fund managers good gamblers?"
Journal of Financial Markets (2022): 100787
“Innovation and Entrepreneurship: A Tale of Siblings”
, with J. Kalu Osiri, Journal of Creativity and Business Innovation (vol. 7, 90-100, 2021)
“Optimizing the performance of mean-variance portfolios in various markets: An ‘old-school’ approach”
Stein, Roberto, and Orlando E. Contreras-Pacheco. Investment Management & Financial Innovations 15, no. 1 (2018): 190.
"Portfolio performance under reference-day risk"
Gonzalez, M., Rodriguez, A., & Stein, R. (2017). Portfolio performance under reference-day risk. Investment Analysts Journal, 46(1), 32-43.
“Adjusted betas under reference-day risk”
Gonzalez, M., Rodriguez, A., & Stein, R. (2014). Adjusted betas under reference-day risk. The Engineering Economist, 59(1), 79-88.
“Not Fooled by Randomness: Using Random Portfolios to Analyze Investment Funds”
Stein, R. Investment Analysts Journal – No. 79, 2014
“Comportamiento de los ingresos por comisiones bancarias en Colombia durante el período 2006-2010”
Stein, R., Contreras, O. E., & Santos, Y. F. B. (2014). Estudios Gerenciales, 30(132), 267-276.
“Herding in Chile: the case of equity trading in the Chilean pension fund market”
Miranda, P., Risco, R., Stein, R. Estudios de Administración, Vol. 18, Nº 1, 2012
“The Determinants of Household Debt Default”
Alfaro, R., Gallardo, N., Stein, R. Central Bank of Chile Working Papers, Nº 574, 2010