Ricardo Research has been formed to apply the ideas developed by the Paul Woolley Centre for the Study of Capital Market Dysfunctionality to the world of institutional investing. Building on the body of theory emerging from the Centre, Ricardo Research aims to transform the way that investors think about financial markets, with the ultimate goal of fostering a more socially useful financial system.

The Paul Woolley Centre was founded at the London School of Economics in 2007 under the direction of Professor Dimitri Vayanos. Its objective is to produce and disseminate high-quality research focused on the workings of capital markets and the social efficiency of allocations achieved in these markets. The Centre is supported by a team of finance professors, faculty members and doctoral students.

Over the last decade, research undertaken at the Centre has led to the development of a set of theories which explain asset mispricing and its adverse consequences for the savings and investment process and the broader economy. The policy implications of these theories are profound and extensive, especially for the management of asset portfolios.

Ricardo Research will work closely with the Paul Woolley Centre to translate their research findings into practical advice. In the spirit of the 19th century economist and investor David Ricardo, we seek to apply bold new academic insights to the stark challenges confronting large institutional investors.

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Long-term investors using short-term strategies

Large institutional investors who claim to invest with a long horizon and who wish to be seen as champions of a socially responsible form of capitalism, may in fact be contributing to dysfunctional capital markets in which short-termism dominates long-term thinking.

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50 years of efficient market thinking

Fifty years on from its inception, the efficient markets hypothesis still exerts a powerful grip on investors. The widespread reliance on market cap indices as benchmarks for active manager success creates a pervasive tendency towards performance-chasing across the industry. Large asset owners have the power to change this dynamic by changing the way that they engage with and monitor their managers.

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