Alex Edmans joins Kai Wu to explore behavioral finance, market inefficiencies, and why investors overlook intangible assets such as employee satisfaction, innovation, and brand strength. Drawing on his book The Madness of Markets, the London Business School finance professor explains why markets overreact to headlines, underreact to long-term value, and leave opportunities for patient, independent investors.
How soccer defeats reveal the influence of investor emotions on stock prices
Why short-term momentum and long-term reversals can coexist
Costco, employee satisfaction, and the intangible value markets struggle to price
Why publicly available research does not automatically eliminate investment opportunities
Measuring innovation through R&D productivity, patent citations, and patent novelty
What brand strength, customer reviews, and employee talent flows reveal about businesses
How AI can improve intangible investing while behavioral biases persist
Updating value investing to include human capital, brands, innovation, and network effects
Separating financially relevant ESG factors from labels, and inclusion from demographic diversity
Finding an investing edge through knowledge, endurance, and independence
Timestamps:
00:00 How investor emotions move stock prices 05:27 Why markets overreact and underreact 11:52 Why employee satisfaction alpha persisted after publication 17:46 R&D, patents, and the value of innovation 21:52 Brand strength and Amazon reviews as investment signals 26:13 Will AI eliminate the edge in intangible investing? 30:25 Tracking talent flows and the long payoff from intangibles 35:36 Finding mispriced intangibles where others cannot or will not look 40:05 Why value investing needs more than accounting adjustments 46:17 The End of ESG and what actually drives shareholder value 52:40 Inclusion, psychological safety, and the limits of simple metrics 58:41 Knowing your edge: knowledge, endurance, and independence 1:04:36 Why Edmans disagrees with efficient market theory
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No information discussed in this podcast should be construed as investment advice. Securities discussed may be held by the hosts and guests, their firms or their clients.
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