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Research 2017-05-21T23:31:55+00:00
 Research Review

A Network Value Theory of a Market, and Puzzles

Abstract:
By considering the stock market as a network that impounds liquidity and information production, the authors were able to study its influence on aggregate stock value and value from dividends. Market participants and practitioners impart value through the network of activity they form. The authors offer a network value model that can price this value and help solve such financial economic puzzles as the equity premium, stocks’ inverse inflation relationship, and lack of news.

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Research Review

The Myth of The Monkey

Abstract:
Professional asset managers are pilloried in the popular press, compared to dart boards and even to monkeys,1 and the literature often suggests they provide no economic value or are even a deadweight loss to the economy. But judging by compensation and the high number of people willing to undertake the work involved in entering the profession, this is still a desirable industry. It’s common to hear that asset management is a zero sum game. As this article shows, however, asset managers provide material economic benefit by producing liquidity and information, which zero sum arguments generally ignore. I also discuss the fallacy that market efficiency is defined by the average manager’s return being equal to (or less than) zero. Because this article addresses an issue crucial to the practice of asset valuation—why the industry should even exist—and because a seriously flawed but oft-repeated critique of the asset management profession has crept into the public consciousness, it develops its argument through a non-technical thought experiment, so industry observers cannot miss it.

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