There is an ongoing debate about the exact cause for the gender pay gap in the workplace. Now, new research from Harvard finds that work ‘bromances’ are an important factor behind the gap. We distill the main findings in our first Deep Dive…
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(total reading time: 4 mins)
There is an ongoing debate about the exact cause for the gender pay gap in the workplace. Now, new research from Harvard finds that work ‘bromances’ are an important factor behind the gap. We distill the main findings in our first Deep Dive.
On the more technical side, we summarise some new work on whether the short legs of popular equity trading (factor) models are worth the effort. Turns out they are not. Finally, equity derivative specialist, Thorsten Wegener, explains the concept of ‘gamma flip’. It will help you understand why equities can get stuck at certain levels, before shooting higher or lower.
Enjoy!
Bilal
How Bromances Explain The Gender Pay Gap (3 min read) Numerous theories claim to explain the gender gaps in pay and promotions. But one of the most compelling is the ‘the old boys’ club’ or perhaps more accurately the “bromance” potential – the supposed advantage men have schmoozing with other, more powerful men. Until now, most of the evidence for this has been anecdotal, but a new Harvard paper, The Old Boys’ Club: Schmoozing and the Gender Gap, by Zoe Cullen and Ricardo Perez-Truglia finds quantitative support for this idea.
(Bilal Hafeez│18th December, 2019)
Drop Your Shorts: Improving Your Equity Investing (4 min read) Equity factor investors choose stocks based on certain attributes that generate consistently higher returns. Common ones include:
• Value: low market price relative to a stock’s fundamental value.
• Momentum: stocks that outperform in the past tends to exhibit strong returns going forward.
• Size: small-cap stocks produce greater returns than large-cap ones.
Typically, factor investors hold long positions in stocks with attractive characteristics combined with short positions in stocks with unattractive characteristics. For instance, a long position in value stocks combined with a short position on growth stocks. This captures not only the outperformance of value stocks (its attractive characteristics) but also the underperformance of growth stocks (its unattractive characteristics).
But a new paper, When Equity Factors Drop Their Shorts, authored by David Blitz, Guido Baltussen and Pim Van Vliet, investigates the long and short legs of equity factor premiums separately, arguing that decomposing the factors in this way is crucial to build efficient portfolios. The findings? Returns are determined overwhelmingly by the long leg of the factors. So drop your shorts.
(Mehdi Farooq│18th December, 2019)
What’s A Gamma Flip? (6 min read) There is a new buzzword in town: ‘Gamma Flip’. It is used to explain (due to a lack of any sane explanation for current market behaviour) why the S&P seems stuck at practically all-time highs and what might happen if things turn bad. In fact, it is so hot that even TV pundits are elaborating on its potential advantages and dangers. But what exactly is it?
(Thorsten Wegener│18th December, 2019)
(The commentary contained in the above article does not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs.)