What happened
Researchers built a new long-term dataset of what "sophisticated" investors expect from the stock market. It turns out these expectations predict future stock returns, while individual investors just chase past gains.
Why it matters
For decades, people have wondered if some investors are just better at predicting the market. This paper shows that "sophisticated" investors, who look at earnings and go against recent trends, actually predict future stock returns. Individual investors, who tend to chase what just went up, do not.