Financial papers!
There are many things in academic finance that are technically right but fail to describe how people actually act in the real world. Plenty of academic finance work is useful and has pushed the industry in the right direction. But its main purpose is often intellectual stimulation and to impress other academics. I don’t blame them for this or look down upon them for it. We should just recognize it for what it is.
One study I remember showed that young investors should use 2x leverage in the stock market. The study argued –statistically–even if you get wiped out you’re still likely to earn superior returns over time. Provided you dust yourself off and keep investing after a wipeout. Which, in the real world, no one would actually do. They’d swear off investing for life. What works on a spreadsheet and what works at the kitchen table are ten miles apart.
The disconnect here is that academics typically desire very precise rules and formulas. But real-world people use it as a crutch to try to make sense of a messy and confusing world that eschews precision. Those are opposite things. You cannot explain randomness and emotion with precision and reason.
Finance is not a credential-sanctioned field like, say, medicine is. People are attracted to the titles and degrees of academics. And that creates an intense appeal to academia when making arguments and justifying beliefs– “According to this Harvard study…” or “As Nobel Prize winner so and so showed…” A classic case for authority bias.
A hard reality is that what often matters most in finance will never win a Nobel Prize: Humility and room for error.