Hongye Guo

• Hongye Guo and Jessica Wachter, Correlation neglect in asset prices. Abstract

  The U.S. stock market’s return during the first month of a quarter positively predicts the second month’s return, which then negatively predicts the first month’s return of the next quarter. The pattern arises from a model in which investors do not fully recognize that earnings announced in the second month of a quarter are inherently similar to those announced in the first month, thereby overreacting to such predictably repetitive earnings. The same pattern exists in the cross-section and time series of industry returns. Evidence from survey data lends support to the mechanism of correlation neglect.

• Hongye Guo and Jessica Wachter (2025), “Superstitious” Investors, Review of Asset Pricing Studies, 15 (1), pp. 1-45. Related
  Links

  Working paper version
• Hongye Guo, Hengjie Ai, Ravi Bansal, Amir Yaron (Working), Identifying preference for early resolution from asset prices.
• Winston Wei Dou, Hui Chen, Hongye Guo, Yan Ji (Working), Feedback and Contagion through Distressed Competition.
• Hongye Guo (Working), Earnings Extrapolation and Predictable Stock Market Returns. Abstract

  The U.S. stock market’s return during the first month of a quarter correlates strongly with returns in future months, but the correlation is negative (positive) if the future month is (is not) the first month of a quarter. These effects offset, leaving the market return with its weak unconditional predictive ability known to the literature. The pattern accords with a model in which investors extrapolate announced earnings to predict future earnings, not recognizing that earnings in the first month of a quarter are inherently less predictable than in other months. Survey data support this model, as does out-of-sample evidence across industries and international markets. These results seriously challenge the Efficient Market Hypothesis and advance a novel mechanism of expectation formation.

Knowledge @ Wharton

• A Transformational Gift for Quantitative Finance at Wharton, Knowledge @ Wharton - 09/15/2025
• Expanding Retirement Portfolios With Alternative Investment Options, Knowledge @ Wharton - 09/12/2025
• Local Regulation and the Future of U.S. Housing Affordability, Knowledge @ Wharton - 09/10/2025
• Football Analytics at Work: Probabilities, Priors, and Fourth-Down Decisions, Knowledge @ Wharton - 09/10/2025
• Loyalty Programs | Peter Fader, Knowledge @ Wharton - 09/09/2025
• Reframing the E-Commerce Antitrust Debate, Knowledge @ Wharton - 09/09/2025
• Why Women Are Avoiding Jobs at “Flat” Workplaces, Knowledge @ Wharton - 09/09/2025
• Can AI Be Energy Efficient?, Knowledge @ Wharton - 09/09/2025
• Interest Rates, Labor Trends, and the Future of Monetary Policy, Knowledge @ Wharton - 09/05/2025
• Navigating Brand Legacy, Minimalism, and Consumer Identity, Knowledge @ Wharton - 09/04/2025