Professor of Finance, Fellow of the British Academy, non-exec director, author, TED speaker. Purposeful business, responsible investing, behavioral economics.
London
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- Followers 13,443
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1. My new book, May Contain Lies: How Stories, Statistics, and Studies Exploit Our Biases – And What We Can Do About It, will be published by Penguin in April. lnkd.in/eDbujwUd
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Low-cost way to deter crime: Installing bright streetlights in NYC cut serious crimes (e.g. assaults and robberies) by 36%. Streetlights cost $200k per public housing complex per year; fall in crime creates $770k of social benefit. nber.org/papers/w25798
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Over 7 years as (Managing) Editor of the Review of Finance, I had to reject 1,000 papers given our increase in standards. "Lessons From 1,000 Rejections" aims to use them constructively by distilling common reasons for rejection to guide future research. papers.ssrn.com/sol3/papers.…
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Yes, McKinsey lied on the benefits of diversity. Here's how they lied: maycontainlies.com/discernme…
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Vivian Hunt, the senior author on four flimsy McKinsey studies falsely claiming financial gains from diversity, received a Damehood for "services to ... women in business". There are huge payoffs to peddling bad research if it gives results people want.
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A "grade forgiveness" policy that gave students the option to retake a class and better their previous grade encouraged enrolment in harder courses, especially STEM. nber.org/papers/w29493
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Delighted to be elected a Fellow of the @BritishAcademy_ for contributions to the humanities and social sciences. Thank you to everyone who has taught me, mentored me, collaborated with me, commented on my work and read/shared/applied my research.
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Ground breaking McKinsey insights on the power of resilience: Resilient companies have higher sales, lower costs and thus higher profits.
But they'd defined "resilient" companies as those in the top 20% of performance. Successful companies are successful.
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Today is my last day as Managing Editor of the Review of Finance. It's been an honor to serve; big thanks to the editors, AEs and referees, plus authors for submitting great papers. The journal is on a strong upward trajectory and will continue under the leadership of @mkacpe.
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A Fact Is Not Data: a single story doesn't tell you what happens in general. Data Is Not Evidence: there's a huge range in research quality; we shouldn't latch onto a study just because we like the findings. TED talk "What to Trust in a Post-Truth World": ted.com/talks/alex_edmans_wh…
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You don’t have to be great to start, but you have to start to be great. Put your New Year’s Resolutions into practice today.
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The Review of Finance launches an Accelerated Review Process which aims to address the issue of papers being stuck in the review process for years, and authors being made to do excessive revisions that add little value (only paper length). revfin.org/accelerated-revie…
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The returns to sleep: A 1-hour increase in weekly sleep increases earnings by 1.1% in the short-run and 5% in the long-run. Effects are due to changes in productivity rather than hours worked. Uses sunset time to tease out causality from correlations. mitpressjournals.org/doi/abs…
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(1/3) The Financial Intermediation Research Society conference in June is replacing university affiliations with research interests on participant nametags. This aims to help foster interactions based on common interests rather than the prestige of someone's institution.
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Spillover effects of major retailers raising their minimum wage: A 10% rise in Amazon wages is associated with a 2.3% rise at other firms in the same labor market. nber.org/papers/w29425
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A fact is not data. Data is not evidence. Evidence is not proof. TEDx talk, "From Post-Truth to Pro-Truth", at bit.ly/protruth
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Honored to be named Professor of the Year by @PoetsandQuants. Thanks so much to my mentors, academic collaborators and practitioner colleagues who've taught me a ton. Biggest thanks to my students - the leaders of tomorrow - who make this job so rewarding. poetsandquants.com/2021/12/2…
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When CEOs use humor on earnings calls, the stock price goes up by more after the call and analysts become more positive about the stock papers.ssrn.com/sol3/papers.…
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Delighted to join Principles of Corporate Finance for the 14th ed, out in April. New material (Responsible Business, Corp Gov, Behavioral Finance, FinTech, Global) and new style (complex concepts explained in simple language). Here's what's new: linkedin.com/posts/aedmans_d…
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Outstanding #EFA2022 keynote speech by @laura_veldkamp on what's unique about big data (compared to information, know-how, other intangibles) and how to value big data as an asset class
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When I chose a career as a Professor of Finance, I didn’t expect to end up on p3 of the Daily Star.
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"The Purpose of a Finance Professor", my keynote speech at the 2021 FMA Annual Meeting. @finmgmtassoc piped.video/watch?v=2OnZ52pE…
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My term as Review of Finance Managing Editor ends in Dec 2022. I'm delighted that Marcin Kacperczyk will be the next ME - an expert in asset pricing and corporate, empirical and theory, rational and behavioral - consistent with our openness to all fields. revfin.org/next-rf-managing-…
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Sustainability isn't an optional extra to be confined to a CSR or SRI department. It should be at the heart of any company and any investment strategy - my @FT article with @iioannoulbs ft.com/content/54f96d4e-82ec… @LBS @LBS_Alumni
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Do stocks outperform Treasury bills? It's not a no-brainer. Fewer than 3 in 7 outperform T-Bills; most stocks have a negative return. The best-performing 4% of stocks explains the net gain for the entire US stock market since 1926. Diversification is key. sciencedirect.com/science/ar…
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The frequently touted McKinsey studies on the benefits of ethnic diversity (which would help me if true) are irreplicable even with their chosen performance measure of EBIT margin. Nor do they hold with ROA, ROE, TSR, sales growth, or gross margin.
papers.ssrn.com/sol3/papers.…
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(1/14) New paper in @J_Fin_Economics links music choices to stock returns. What drives the stock market? The Efficient Markets Hypothesis argues it’s rational calculations. But traders are humans, and humans are affected by emotions. papers.ssrn.com/sol3/papers.…
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Michael Jensen died this week. His 1976 article with Meckling is the most cited corporate finance paper of all time - but also one of the most misunderstood and maligned. Here's what he actually wrote, and even stakeholder capitalists can learn from it. promarket.org/2021/05/09/sta…
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The Review of Finance's impact factor has risen to 3.894, from 2.885 last year and 1.906 the year before. Part of the increase is due to the IF now containing Early Access articles - without it, the IF would have risen to 3.298. 5-year IF has risen from 3.066 to 4.653.
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Here's a short, non-technical summary of the many problems with the McKinsey diversity studies: maycontainlies.com/discernme… #MayContainLies
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The effects of a guaranteed income (such as Universal Basic Income): A Randomized Control Trial gave 1,000 low-income individuals $1k/month for three years. Hours worked fell; recipients reallocated time to leisure rather than human capital development. nber.org/papers/w32719
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New research: Football teams that score more goals win more games than peer teams do. mckinsey.com/business-functi…
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Ripple effects of quantitative easing: The ECB's bond purchase programme helped large firms to issue bonds. This reduced their need for bank loans - allowing banks to lend instead to smaller firms unable to issue bonds. Published in the Review of Finance revfin.org/making-room-for-t….
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A better solution than raising corporation tax is to scrap the tax-deductibility of interest. This will remove a distortion that causes companies to favour debt over equity. They will then choose capital structures based on economic principles not tax avoidance.
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Best Paper in the Review of Finance goes to Are US Industries Becoming More Concentrated? (Grullon, Larkin, Michaely.) Industry conc'n has soared over the past two decades. Not due to greater efficiency, but barriers to entry and lax antitrust enforcement. revfin.org/are-us-industries…
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Burning Man sculpture: two adults violently disagree, but their inner child wants to reconcile
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Beware the words "Research has shown that ..." You can always find research to back up whatever point you'd like to make. Instead, focus on the highest-quality research.
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ESG is under attack. True believers wish to keep it but rebrand it; opponents seek to ban it outright. What's the alternative? This new paper proposes Rational Sustainability: pursuing long-term value while recognising diminishing returns and trade-offs. ssrn.com/abstract=4701143
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The Review of Finance has had a big improvement in submission quality so we're increasing the number of papers published in each issue from 5-6 to 9. The first 9-paper issue is now out and at academic.oup.com/rof/issue/2….
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Delighted to win the Finance for the Future award for Drving Change in the finance community. My hope is this will elevate the agenda of making sustainability mainstream - in the near future, "sustainable finance" will simply be "finance". london.edu/news/lbs-faculty-…
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People ask why McKinsey would release flawed studies on the business case for diversity. Because they have huge incentives to do so: it boosts their reputation, and the senior author of all 4 studies got a damehood for "services to ... women in business". maycontainlies.com/discernme…
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Super-excited about today, the UK publication date for May Contain Lies: How Stories, Statistics, and Studies Exploit Our Biases - And What We Can Do About It (@PenguinUKBooks).
This book is about misinformation … but with a twist. We often think it’s about checking the facts, but the punchline of the book is that this isn’t enough. Even if the facts are 100% accurate, they may still be misleading: we make incorrect inferences due to our biases. I focus on these more subtle, and more dangerous, mistakes - in the spirit of Thinking, Fast and Slow but applied to information rather than choices - and how to combat them.
I got into this topic because of my work as a business school professor – but the book goes beyond business to politics, science, health advice, even parenting. It goes beyond thinking smarter as individuals to creating smart-thinking organisations that harness diversity of thought, overcome groupthink and embrace challenge.
I particularly tried to make the book accessible, engaging, and entertaining but without dumbing it down, so that the reader is so swept up in the storytelling that they don’t notice they are learning about quite complex things. By the end I hope it helps you think sharper, smarter, and more critically.
The book market is competitive, in part because some succeed on the back of misinformation! Thus, if you do enjoy it, I'd be very grateful if you could spread the word and consider leaving a review on Amazon/Goodreads.
Big thanks to my agent @ChrisWellbelove , commissioning editor @jbirkett and editor @buzuk_celia for their vision for this book and numerous helpful comments that made it far better than what I'd have achieved myself.
amazon.co.uk/May-Contain-Lie…
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Financial literacy is a critical skill, but it costs up to $100k to go to business school. My final @GreshamCollege public lecture series is on "The Principles of Finance", and aims make the fundamentals of finance accessible to all for free. No finance background required.
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The Review of Finance is delighted to announce the appointment of Daniel Paravisini and Chris Parsons as Editors, to start a three-year term commencing in January 2021. We thank @amiyatosh and Kelly Shue, whose terms come to an end in December, for their outstanding service.
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Leaders who don’t listen to others will eventually be surrounded by people who have nothing to say - @craiggroeschel
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What Stakeholder Capitalism Can Learn From Milton Friedman: my article in @ProMarket_org, the blog of the @StiglerCenter of @ChicagoBooth. promarket.org/2020/09/10/wha…
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2 years in the making, and 15 years since I first started the research that went into it, it's nice to finally receive the hard copies of my book on Responsible Business - how companies can achieve both purpose and profit. Available at mybook.to/Grow-the-Pie
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The Fama-French factors, a cornerstone of both academic research and practical investing, change according to when you download them. Who discovered this, how, and is there an innocuous explanation or something more concerning? Bloomberg article. bloomberg.com/news/features/…
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"Aggregate Confusion: The Divergence of ESG Ratings" is forthcoming in the Review of Finance. 38% of rating disagreement comes from Scope (which issues to include), 56% from Measurement, 6% from Weighting. By @berg_florian, J. Kölbel, @RobertoRigobon. papers.ssrn.com/sol3/papers.…
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“Profit for a company is like oxygen for a person. If you don't have enough of it, you're out of the game. But if you think your life is about breathing, you're really missing something.” - Peter Drucker
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The Review of Finance announces a new Code Sharing Policy for all papers initially submitted on or after 1 January 2022, to ensure the quality and reliability of papers that we publish. Further details at revfin.org/new-code-sharing-…
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50 years ago, Milton Friedman wrote "The Social Responsibility of Business is to Increase Its Profits". This statement is widely misunderstood and misquoted as advocating stakeholder exploitation. Here's what he actually said and didn't say: promarket.org/2020/09/01/fri… by @zingales
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Green capital requirements seem a no-brainer, but this paper by Oehmke and Opp highlights their limitations. Higher capital requirements for brown loans may crowd out lending to green firms. Climate is an externality, and thus best dealt with by taxes. papers.ssrn.com/sol3/papers.…
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My book, "Grow the Pie: How Great Companies Deliver Both Purpose and Profit", is now on Amazon. Creating value for society isn't just "worthy" but good business sense - companies that do so deliver higher long-term returns. To reach the land of profit, follow the road of purpose.
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The world's largest pension fund has cooled on ESG - due to the recognition that only certain ESG factors are linked to long-term returns, contrary to common claims. A responsible pension fund delivers both returns to pensioners and social value. bloomberg.com/opinion/articl…
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Successful people do consistently what normal people do occasionally: @craiggroeschel
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Shareholder capitalism is seen as the cause of all the world's problems. A new book by David McLean challenges this view. It's based on sound economics, not ideology, yet is highly readable and filled with examples. Read it; it will change how you think. amazon.co.uk/Case-Shareholde…
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The new edition of Principles of Corporate Finance is out today. A whole new chapter on responsible business, through updates to corporate governance, behavioural finance/market efficiency; more precise, clearer and simpler explanations throughout. amazon.co.uk/Principles-Corp…
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London Business School appoints Sergei Guriev as Dean. Professor Guriev is currently the Provost of Sciences Po, Paris, and was formerly Chief Economist of the European Bank of Reconstruction and Development. london.edu/news/renowned-eco…
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Brexit is happening. What should we do about it? alexedmans.com/the-rational-…
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"Research shows that ..." is a dangerous phrase as there's huge variation in the quality of research. How can a layperson quickly check whether a study is reliable without having to delve into the weeds? Here's a simple guide: alexedmans.com/wp-content/up…
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Delighted to be the new co-author of Principles of Corporate Finance, the book I studied as an undergrad and we all had at Morgan Stanley. This new edition makes it fit-for-purpose for finance in 2022, esp. highlighting a firm's responsibility to society. london.edu/news/edmans-joins…
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Grateful for the SFS Cavalcade Best Paper in Corporate Finance Award for "CEO Compensation: Evidence From the Field", co-authored with @GoslingTj and @DirkJenter. Short summary at voxeu.org/article/how-boards…
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A pleasure to give the keynote at the @LBS Trans-Atlantic Doctoral Conference, addressing the next generation of scholars. Over the next 1.5 days they will present research to each other and provide constructive criticism. (1/2)
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The front and back covers for May Contain Lies. Thanks to Penguin Random House for the cover, and to Gillian Tett, Raghu Rajan, Vaclav Smil, and Andy Haldane for taking time to read the book and provide endorsements. Looking forward to the UK launch on Thursday!
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Behavioral economics in action - encouraging litter-throwing by using it as a polling device in Edinburgh
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Congrats to Patrick Bolton (@Columbia_Biz) and Haizhou Huang on winning the Review of Finance Best Paper Award, for "The Capital Structure of Nations" (a study of how countries finance themselves). Non-technical summary at blog.oup.com/2018/06/nations….
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"The Purpose of a Finance Professor", based on FMA keynote and since enhanced by others' input. Covers: the freedom to take risks and pursue big questions; the role of luck; the collaborative nature of our profession; and the size of our potential impact papers.ssrn.com/sol3/papers.…
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How confirmation bias hurts your wallet: StockTwits users who live in a complete echo chamber (e.g. bulls who only follow other bulls) give stock tips that underperform by 2.3% in just 30 days. In the RFS by @prof_cookson, Joey Engelberg and @w_mullins_ maycontainlies.com/how-confi…
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Only 2% of CEOs who signed the Business Roundtable statement ran it past the board, casting doubt on whether they intend to significantly change their behaviour. Corporate decisions with major consequences are ratified by the board. wsj.com/articles/stakeholder…
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Unfortunately, this is a very weak paper that has been accepted uncritically due to confirmation bias. See maycontainlies.com/does-boar… for the issues. #MayContainLies
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In March 2022, my social media feeds lit up with many people sharing the article below. But the study never existed. Reuters wrote about the study, and people shared the Reuters article, without ever checking - because they wanted it to be true. lnkd.in/eAgsJTmy
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Just finished "Why We Sleep" and everything in it confirmed what I wanted to be true. So I worried that I was suffering from confirmation bias and started to check the facts - and found allegations of multiple scientific and factual errors. guzey.com/books/why-we-sleep… by @alexeyguzey
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The idea for my paper on soccer and the stock market came in Tim Johnson's PhD empirical asset pricing class when he was visiting MIT. Until then, I was only interested in corporate but his class was so good. He continued to mentor me after he returned to LBS. A great man.
It breaks my heart to share that our beloved friend and highly respected @giesbusiness colleague, Tim Johnson, passed away unexpectedly on 12/31.
He was the perfect colleague. An amazing researcher & teacher. An even greater friend. Always kind and wise.
We miss you, Tim.
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McKinsey's three prior reports on the benefits of diversity have already been discredited. They've doubled down in their latest report, "Diversity Matters Even More", claiming "the business case is the strongest it has been". But it's even more flawed. maycontainlies.com/discernme…
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In "The End of ESG" I argued that ESG is extremely important and nothing special - no different to any other long-term investment. My new paper, "Applying Economics - Not Gut Feel - To ESG" shows how decades of investment research can inform ESG thinking. papers.ssrn.com/sol3/papers.…
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Investors got so excited about Zoom that they invested in the wrong company. They wanted ticker ZM but chose ticker ZOOM - a defunct Chinese wireless comms company (Zoom Technologies), causing its shares to skyrocket 1,500% and the SEC to suspend its shares. HT @iioannoulbs
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Competence Greenwashing: (1) Professors jumping on the ESG bandwagon with limited expertise on how mixed the evidence is and how complex the trade-offs are (2) Practitioners calling themselves ESG experts based on ESG certificates taught by such profs. papers.ssrn.com/sol3/papers.…
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Massive scandal: A single ESG rating fails to capture the totality, complexity, and subjectivity of ESG risks and opportunities that a company faces. ESG investors might have to actually do some work rather than implementing "ESG-by-numbers" bloomberg.com/news/articles/…
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The lead article in the Review of Finance is "Information in Financial Markets and Its Real Effects", Itay Goldstein's keynote speech at the European Finance Association annual meeting. On how financial markets aren't a sideshow but affect the real economy academic.oup.com/rof/article…
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New paper in the @ReviewofFinance explains the stock market crashes of Oct 1929 and 1987, and the 2010 flash crash - all too large to be explained by fundamentals or simple demand-and-supply. By Albert S. Kyle and Anna Obizhaeva. academic.oup.com/rof/article…
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New Review of Finance Managing Editor's Report: impact factor up 48% to 2.885; acceptance rate of 4.7%; median turnaround time of 33 days. The average paper underwent 1.3 revisions before acceptance. revfin.org/wp-content/upload…
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The flawed McKinsey research on DEI has been cited by 51 federal agencies. Companies might think that they can play fast and loose with the data to give a result that people want to hear. But it may have real consequences in distorting the law. thecollegefix.com/flawed-dei…
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FinTech for the Poor: How machine learning improve lending efficiency without discrimination. A ML algorithm can increase lending by 60% without increasing delinquencies, or cut delinquencies by 33% without reducing approvals. academic.oup.com/rof/article…
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Why study executive pay? Thoughts from my talk at the NBER Doctoral Training Workshop on Economics of Executive Compensation, organised by @DirkJenter and Kelly Shue.
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Brownwashing: having more photos of ethnic minorities in your sustainability reports than you do in your workforce (for Johnson & Johnson, it's 70% vs. 30%).
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New TEDx talk, "The Pie-Growing Mindset". Purpose - the desire to build a better world - frees a company from having to justify every decision with a spreadsheet. This inspires it to create value that it wouldn't have otherwise, ultimately boosting profit. piped.video/watch?v=iM67YJtY…
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Highlights from 2018/9 Review of Finance editor's report: acceptance rate has fallen to 4% (2% for fast-tracks). 75% of accepted papers are accepted after one round (down from 60%); mean number of rounds is 1.2 (down from 1.4). revfin.org/managing-editors-…
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Best Corporate Finance Paper in the Review of Finance goes to The Externalities of Corruption by @ProfMariassunta, @ProfXiaoyunYu et al. A shock that reduced corruption in China allowed capital and labour to be allocated based on productivity, not cronyism revfin.org/the-externalities…
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The @LBS Centre for Corporate Governance launches its new website. There's a lot of rigorous academic evidence on governance reform, but written for other academics. We summarise the punchlines of key papers in simple language for a general audience. london.edu/faculty-and-resea…
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The US version of May Contain Lies is published today! Thanks so much to everyone who's contributed to the (embryonic) success of the UK version, helping it become an Amazon #1 category bestseller and Amazon Top 100 across all books. amazon.com/May-Contain-Lies-…
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How do long-term investors choose portfolios in a world in which risk and returns change over time? The lead article in the Review of Finance is "Portfolios for Long-Term Investors" by @JohnHCochrane Open Access at academic.oup.com/rof/article…
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(1/6) In my short career I've produced 272 pages of Internet Appendix tables (robustness checks that don't make it into the printed paper), plus 451 pages of letters responding to concerns of editors and reviewers.
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The Review of Finance is delighted to announce the appointment of Marcin Kacperczyk as Editor and Anna Cieslak, Nandini Gupta, Mark Leary, Michela Verardo, and Yongxiang Wang as new Associate Editors: revfin.org/editorial-board-c…. We look forward to working with them all.
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My TEDx talk, "What To Trust in a Post-Truth World", has been elevated to a mainstage TED talk at go.ted.com/alexedmans. Highlights importance of evidence over anecdote, seeing two sides to every story, and not accepting a study just b/c you agree with it. @oxfordalumni @lbs
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