Luigi Zingales Research on Trusting the Stock Market Featured in The Economist

The Economist took a look at U.S. stock markets and why they currently aren’t as robust as equity markets in other countries. What’s unusual about this situation is that, in general, the American stock market leads the way and others react. The article cites several potential reasons, including the relative valuation of companies, rising interest rates, and inflation as well as the historical trend in stock prices.

Another factor, according to the Economist, is behavioral finance and how levels of trust by investors can affect the market. This topic is explored in a paper by Luigi Zingales, Robert C. McCormack Professor of Entrepreneurship and Finance; Luigi Guiso and Paolo Sapienza, published by London’s Center for Economic Policy Research. According to the article, their research, Trusting the Stock Market, companies touched by scandal, like WorldCom, are not appealing to investors and are likely to underperform.

Learn more on Professor Zingales’ research on Trusting the Stock Market.