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Lauren Cohen Assistant Professor of Finance Harvard
Business School Baker Library 273 Soldiers
Field Boston, MA 02163 Phone: 617.495.3888 Email: lcohen@hbs.edu |
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Supply and Demand
Shifts in the Shorting Market (with
Karl Diether and Christopher Malloy), 2007 Journal of Finance 62, 2061-2096. ·
Winner
of the Smith Breeden Prize, Distinguished Paper, for the best paper published
in the Journal of Finance, 2007 |
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Loyalty Based
Portfolio Choice, May
2007
Review of Financial Studies,
forthcoming. Economic Links and Predictable
Returns (with Andrea Frazzini), May 2007 Journal of Finance, forthcoming. Appendix
containing results on supplier momentum and analyst revisions ·
Winner
of First Prize, ·
Winner
of BSI Gamma Foundation Grant, Firm Characteristics and Investment
Management, 2006 The Small World
of Investing: Board Connections and Mutual Fund Returns (with
Andrea Frazzini and Christopher Malloy), May 2008 Journal
of Political Economy,
forthcoming. ·
Winner
of Barclays Global Investors Award, Best Paper in Asset Pricing, European
Finance Association 2007 |
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Working
Papers |
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Hiring
Cheerleaders: Board Appointments of "Independent" Directors (with
Andrea Frazzini and Christopher Malloy), August 2008 We test the
hypothesis that firms appoint independent directors who are overly
sympathetic to management, while still technically independent according to
regulatory definitions. We explore a
subset of independent directors for whom we have detailed, micro-level data
on their views regarding the firm prior
to being appointed to the board: sell-side analysts who end up serving on the
board of companies they previously covered.
We find striking evidence that boards appoint overly optimistic
analysts who exhibit little skill in evaluating the firm itself, other firms
within the firm’s industry, or even other firms in general. The magnitude of the optimistic bias is
large: 82.0% of appointed recommendations are strong-buy/buy recommendations,
compared to 56.9% for all other analyst recommendations. We find that
appointed analysts’ optimism is stronger at precisely those times when firms’
benefits are larger, and that appointed analysts appear to be more closely
tied to appointing firms than the title "independent" director
would suggest. Our results challenge
the widely held view that appointments of independent directors necessarily
add objectivity to the board of a firm. Sell Side School
Ties (with Andrea Frazzini and Christopher Malloy), April
2008 We study the
impact of social networks on agents’ ability to gather superior information
about firms. Exploiting novel data on the educational backgrounds of sell
side equity analysts and senior officers of firms, we test the hypothesis
that analysts’ school ties to senior officers impart comparative information
advantages in the production of analyst research. We find evidence that
analysts outperform on their stock recommendations when they have an
educational link to the company. A simple portfolio strategy of going long
the buy recommendations with school ties and going short buy recommendations
without ties earns returns of 5.40% per year. We test whether Regulation FD,
targeted at impeding selective disclosure, constrained the use of direct
access to senior management. We find a large effect: pre-Reg FD the return
premium from school ties was 8.16% per year, while post-Reg FD the return
premium is nearly zero and insignificant. In contrast, in an environment that
did not change selective disclosure regulation (the UK), the analyst
school-tie premium has remained large and significant over the entire sample
period. |
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Attracting Flows
by Attracting Big Clients: Conflicts of Interest and Mutual Fund Portfolio
Choice (with Breno Schmidt), June 2008 ·
Winner
of Society of Quantitative Analysts Award, Best
Paper in Quantitative Investments, Western Finance Association 2007 ·
Winner
of Barclays Global Investors Best Paper Prize, Asset Allocation Symposium,
European Finance Association 2006 We
explore a new channel for attracting inflows using a unique dataset of
corporate 401(k) retirement plans and their mutual fund family trustees.
Families secure substantial inflows by being named trustee of a 401(k) plan.
We find that family trustees significantly overweight their 401(k) client
firm’s stock. Trustee overweighting is more pronounced when the relationship
is more valuable to the trustee family, and is concentrated in those funds
that receive the most benefit from the inflows. When other mutual funds are
selling the client firm’s stock, the trustee does the opposite and
significantly increases its holdings of the sponsor. This overweighting is
not explained by superior information. We quantify a benefit to the 401(k)
sponsor firm of having its price supported by its trustee fund’s more severe
overweighting. We also provide initial estimates of the potential loss to
mutual fund investors, which can be non-trivial over the life of the
trustee-sponsor relationship. |
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Teaching |
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Finance 1 |
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