Shimon Kogan

Marius Guenzel, Shimon Kogan, Marina Niessner, Kelly Shue, AI Personality Extraction from Faces: Labor Market Implications.

Shimon Kogan (2024), Are Cryptos Different? Evidence from Retail Trading, .

Abstract: Trading in cryptocurrencies grew rapidly over the last decade, dominated by retail investors. Using data from eToro, we show that retail traders are contrarian in stocks and gold, yet the same traders follow a momentum-like strategy in cryptocurrencies. The differences are not explained by individual characteristics, investor composition, inattention, differences in fees, or preference for lottery-like assets. We conjecture that retail investors have a model where cryptocurrency price changes affect the likelihood of future widespread adoption, which leads them to further update their price expectations in the same direction.

Description: Joint with Igor Makarov, Marina Niessner, and Antoinette Schoar.

Shimon Kogan, AI Prediction of Labor Outcomes: Personality Extraction from Faces.

Abstract: Recent developments in machine learning and artificial intelligence have enabled the inference of Big 5 personality traits from a single photograph of an individual. This study evaluates the ability of the novel Photo Big 5 personality measure to forecast labor market outcomes. Using the universe of LinkedIn data for MBA graduates, as well as detailed admissions and matriculation records from a top-tier MBA program, we show that the Photo Big 5 is highly predictive of initial compensation. Compared to older survey-based personality measures, the Photo Big 5 is readily available to all employers and less prone to manipulation, and thus has the potential to be widely adopted in firm hiring and promotions processes.

Description: with Marks Guenzel, Marina Niessner, and Kelly Shue.

Shimon Kogan, Avoiding Idiosyncratic Volatility: Flow Sensitivity to Individual Stock Returns.

Abstract: Despite positive and significant earnings announcement premia, we find that institutional investors reduce their exposure to stocks before earnings announcements. A novel result on the sensitivity of flows to individual stock returns provides a potential explanation. We show that extreme announcement returns for an individual holding lead to substantial outflows, controlling for overall performance, and they increase the probability of managers leaving the fund. Reducing the exposure to these stocks before the announcement mitigates the outflows. We build a model to describe and quantify this tradeoff. Overall, the paper identifies a new dimension of limits to arbitrage for institutions.

Description: with Marco Di Maggio, Francesco A. Franzoni, and Ran Xing.

Shimon Kogan (2023), Social Media and Financial News Manipulation, Review of Finance.

Abstract: We examine an undercover Securities and Exchange Commission (SEC) investigation into the manipulation of financial news on social media. While fraudulent news had a direct positive impact on retail trading and prices, revelation of the fraud by the SEC announcement resulted in significantly lower retail trading volume on all news, including legitimate news, on these platforms. For small firms, volume declined by 23.5% and price volatility dropped by 1.3%. We find evidence consistent with concerns of fraud causing the decline in trading activity and price volatility, which we interpret through the lens of social capital, and attempt to rule out alternative explanations. The results highlight the indirect consequences of fraud and its spillover effects that reduce the social network’s impact on information dissemination, especially for small, opaque firms.

Description: with Toby Moskowitz and Marina Niessner.

Shimon Kogan (Draft), Pure Momentum in Cryptocurrency Markets.

Abstract: Momentum is one of the most widespread, persistent, and puzzling phenomenon in asset pricing. The prevailing explanation for momentum is that investors under-react to new information, and thus asset prices tend to drift over time. We use a unique feature of cryptocurrency markets: the fact that they are open 24/7, and report returns over the last 24 hours. Thus, the one-day return is subject to predictable fluctuations based on the removal of lagged information. We show that investors respond positively to changes in reported returns that are unrelated to any new release of information, or change in the asset fundamentals. We call this behavioral anomaly "Pure Momentum".

Description: Joint with Cesare Fracassi.

Shimon Kogan, Fee the People: Retail Investor Behavior and Trading Commission Fees.

Abstract: We show retail investors are highly responsive to changes in trading commission fees. Using a triple-difference research design around the removal of fees for retail investors on the international retail broker platform, eToro, we show investors responded by trading approximately 30% more frequently, in smaller order sizes, and increasing portfolio turnover. Removing fees also spurred retail investors to reallocate their portfolios and diversify. Retail investors’ gross return performance did not significantly change around the fee removal despite trading more often, but retail investors earned significantly higher returns on a net basis after accounting for fees incurred in the pre-period. Finally, using demographic information, we show removing fees disproportionately affected inexperienced investors with lower deposit amounts and lesser technological sophistication both by expanding the extensive margin of investors and changing trading activity for the intensive margin of investors. Together, our results suggest commission fees play an influential role as a speed bump for retail investor participation, trading activity, and diversification.

Description: with Omri Even-Tov, Kimberlyn George, and Eric C. So.

Shimon Kogan, The Asymmetry in Responsible Investing Preferences.

Abstract: We design an experiment to understand how social preferences affect investment decisions through stock allocations and probability assessments. The major preference channel is asymmetric in social outcomes – although negative and positive responsible investment (RI) externalities have the same magnitudes, negative externalities have greater impact on investment choices. The effect is persistent, but heterogenous. We also find asymmetries in belief formation and learning constitute a secondary channel. Overall, our results are consistent with important stylized empirical facts and the predictions of recent RI theories that social preferences lead to different investment choices, but our analyses also suggest important future modeling directions.

Description: with Jacquelyn Humphrey, Jacob Sagi, and Laura Starks.

Shimon Kogan (2018), Information, Trading, and Volatility: Evidence from Firm-Specific News, The Review of Financial Studies.

Abstract: What moves stock prices? Prior literature concludes that the revelation of private information through trading, and not public news, is the primary driver. We revisit the question by using textual analysis to identify fundamental information in news. We find that this information accounts for 49.6% of overnight idiosyncratic volatility (vs. 12.4% during trading hours), with a considerable fraction due to days with multiple news types. We use our measure of public information arrival to reinvestigate two important contributions in the literature related to individual s of stock returns on aggregate factors.

Description: with Jacob Boudoukh, Ronen Feldman, and Matthew Richardson.

Shimon Kogan, “Is Investor Rationality Time Varying? Evidence from the Mutual Fund Industry”. In Behavioral Finance: Where do Investors Bi- ases Come From?, edited by, (2016)

Abstract: We provide novel evidence that mutual fund returns are predictable after periods of high market returns but not after periods of lowmarket returns. The asymmetric conditional predictability in relative performance cannot be fully explained by time-varying differences in transaction costs, in style exposures, or in survival probabilities of funds. Performance predictability is more pronounced for funds catering to retail investors than for funds catering to institutional investors, suggesting that unsophisticated investors make systematic mistakes in their capital allocation decisions.

Description: with Vincent Glode, Burton Hollifield, and Marcin Kacperczyk.