Alex Edmans on Market Psychology, Intangible Assets and Edges That Persist

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.The Madness of Marketshttps://amzn.to/3T9rdotAlex Edmans on Twitterhttps://twitter.com/aedmansTopics covered:How soccer defeats reveal the influence of investor emotions on stock pricesWhy short-term momentum and long-term reversals can coexistCostco, employee satisfaction, and the intangible value markets struggle to priceWhy publicly available research does not automatically eliminate investment opportunitiesMeasuring innovation through R&D productivity, patent citations, and patent noveltyWhat brand strength, customer reviews, and employee talent flows reveal about businessesHow AI can improve intangible investing while behavioral biases persistUpdating value investing to include human capital, brands, innovation, and network effectsSeparating financially relevant ESG factors from labels, and inclusion from demographic diversityFinding an investing edge through knowledge, endurance, and independenceTimestamps:00:00 How investor emotions move stock prices05:27 Why markets overreact and underreact11:52 Why employee satisfaction alpha persisted after publication17:46 R&D, patents, and the value of innovation21:52 Brand strength and Amazon reviews as investment signals26:13 Will AI eliminate the edge in intangible investing?30:25 Tracking talent flows and the long payoff from intangibles35:36 Finding mispriced intangibles where others cannot or will not look40:05 Why value investing needs more than accounting adjustments46:17 The End of ESG and what actually drives shareholder value52:40 Inclusion, psychological safety, and the limits of simple metrics58:41 Knowing your edge: knowledge, endurance, and independence1:04:36 Why Edmans disagrees with efficient market theoryLearn more about the Excess Returns podcast network:https://excessreturns.coNo 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.