OP-Pohjola Group Research Foundation has granted its first EUR 20,000 encouragement award to Matti Keloharju in recognition for his major achievements in financing research. The Foundation's annual doctoral dissertation award worth EUR 10,000 goes to Matthijs Lof's Essays on Expectations and the Econometrics of Asset Pricing.
Matti Keloharju (b. 1965), Professor of Finance at Aalto University's School of Business, is internationally known and distinguished in the scientific community. Keloharju is one of the world's leading researchers in the field of behavioural finance. His research focused on the fact how observed behaviour deviates from rational behaviour that tries to maximise profit. Most research focuses on finding out about the behaviour of investors, but Keloharju has been studying factors that motivate investors to trade in the equity market.
Keloharju received his Doctorate of Science in Economics and Business Administration at Helsinki School of Economics (HSE) in 1993 and has been working at the HSE as researcher and lecturer since 1992. He took the post of Professor of Finance in 1999, and was invited to take the post of Eero Kasanen Professor of Finance in 2013. Keloharju has been visiting researcher and Professor at the UCLA Anderson School of Management and New York University Stern Business School. He is one of the most cited researchers in Europe in the field of financing.
OP-Pohjola Group Research Foundation decided to establish recognition and encouragement awards in honour of its 40th anniversary. Encouragement awards are given to persons who have shown exceptional creativity in research and who can be expected to produce significant results also in the future.
Dissertation award for research on share price expectations
In his doctoral dissertation that received an excellent grade at the University of Helsinki's Faculty of Social Sciences, Matthijs Lof (b. 1982) studied how investors' different ways of forming expectations affect the dynamic properties of share prices and therefore the applicability of econometric models.
Not all investors are assumed to form their expectations in the same manner. Investors may be, for example, fundamentalists, trend followers or counter-trend investors. Fundamentalists expect share prices always to return to the fundamental value, which is estimated on the basis of predicted dividends. Trend followers, on the other hand, expect the current trend to continue at least in the short term, even if it leads to a bigger and bigger deviation from the fundamental value. Counter-trend investors go against the current and have an opposing idea to trend followers concerning the short-term changes of prices. In addition to expectations, these models also involve a continuously developing dynamism: more and more investors choose a strategy that has proved successful in the past.
According to the results obtained from Lof's S&P 500 material, many macroeconomic variables, industrial production in particular, are useful when estimating the proportion of fundamentalists and trend followers in the market. The key result is that during favourable economic conditions the number of trend followers increases, with the result that share prices deviate from the fundamental values. Lof's research also provides a new perspective as to why share prices may fluctuate a lot more than could be predicted on the basis of the estimated value of dividends.
For more information, please contact: Maarit Lindström, Representative of OP-Pohjola Group Research Foundation, tel. +358 (0)40 531 8262