Using a novel sample of professional asset managers, we document positive incremental alpha on newly purchased stocks that decays over twelve months. While managers are successful forecasters at these short-to-medium horizons, their average holding period is substantially longer (2.2 years). Both slow alpha decay and the horizon mismatch can be explained by strategic trading behavior. Managers accumulate positions gradually and unwind gradually once the alpha has run out; they trade more aggressively when the number of competitors and/or correlation among information signals is high, and do not increase trade size after unexpected capital flows. Alphas are lower when competition/correlation increases.
This conference looked at whether the COVID crisis has had a pervasive impact on the investment landscape in the short and long term, and asked delegates to question whether some of the investment assumptions used in the past are still applicable in the future. It also looked at the influence of the COVID crisis as an accelerator for certain key themes driving markets; examined the way business is conducted and decisions are made; and tried to predict the impact of technological innovation on businesses, the way we work and the future of the global economy. Importantly it challenged investors to think about what needs to change, and hasn’t yet, and how the crisis can be a catalyst for new and improved business practices and investment allocations.