Professor of Finance
Zhi Da is a Professor of Finance at the University of Notre Dame’s Mendoza College of Business. His research focuses on empirical asset pricing and investment. In recent papers, he studied the role of limited investor attention, the behavior of institutional investors, and cash flow risks of financial assets. His papers have been published in the Journal of Finance, Review of Financial Studies, Journal of Financial Economics among others. He is currently serving as an associate editor at several journals including Review of Financial Studies, Journal of Banking and Finance, and Critical Finance Review. Zhi has received the 2017 JFQA William F. Sharpe Award for Scholarship in Financial Research, among other research awards and grants. After gaining a BBA and an MSc from National University of Singapore, he worked at the interest rate and exotic derivative trading desk in DBS Bank. He subsequently earned a PhD in Finance from Northwestern University.
“Extrapolative Beliefs in the Cross-Section: What Can We Learn from the Crowds?” with Xing Huang and Lawrence J. Jin. Working paper 2019.
Using novel data from a crowdsourcing platform for ranking stocks, we investigate how individuals form expectations about future stock returns in the cross-section. We find that investors extrapolate from stocks’ recent past returns, with more weight on more recent returns, especially when recent returns are negative or salient. Such extrapolative beliefs are stronger among non-professionals. Moreover, consensus rankings negatively predict future stock returns, more so among stocks with low institutional ownership and high degree of extrapolation, consistent with the asset pricing implications of extrapolative beliefs. A trading strategy that sorts stocks on investor beliefs generates an economically significant profit.