Auburn University Harbert College of Business faculty member Christian Goulding is the third-place recipient of the 2022 Roger F. Murray Prize from the Institute for Quantitative Research in Finance (Q Group) for developing and testing a novel asset pricing theory applied to the U.S. stock market.

Named for the highly influential economist who advised Congress and business leaders in the 1950s and ‘60s, the Murray Prize recognizes excellence and scientific achievement in quantitative financial research. Some of the most prominent financial researchers in the world have won this prize over the last 40-plus years.

Goulding presented his research documented in the paper “Disagreement, Skewness, and Asset Prices,” which he co-authored with Shrihari Santosh and Xingtan Zhang from the University of Colorado at Boulder.

“We developed a new stock pricing model which indicates that disagreement about a firm’s fundamental value results in predictable pricing biases, which are amplified by the skewness of the stock,” said Goulding, an assistant professor in the Department of Finance.

“When investors believe that a particular stock has a higher likelihood of big returns and a lower likelihood of big losses, that stock is described as positively skewed,” Goulding explained.

What happens to positively skewed stocks when investors disagree on those companies’ expected returns?

Goulding and his colleagues found that higher disagreement and higher positive skewness leads to lower stock returns compared to stocks with less disagreement and skewness.

“We found that the impact of these two variables on returns is not only statistically detectable, but also economically significant, based on analysis of over 30 years of data on U.S. stocks,” Goulding said.

“The difference in returns between the lowest-disagreement, lowest-skewness stocks and highest-disagreement, highest-skewness stocks can be more than 14% per year.”

This is the second consecutive year that Goulding’s research has received a Murray Prize. He co-authored the 2021 third-place paper “Decoding Systematic Relative Investing: A Pairs Approach.”