Bought and paid for?
A few years ago three behavioural-finance researchers put a deceptively simple question* to more than 26,000 people—academic economists, ordinary households, retail investors, financial advisers and professional fund managers alike. Suppose a piece of good news about a company’s future earnings is already four weeks old. Should you expect its shares to earn higher returns from here? Most academics said no: around 70% reckoned that month-old news was already in the price, and so told you nothing about the returns to come. Almost everyone else said yes—including about three-quarters of retail investors, two-thirds of financial advisers and, more startling, over half...