Searching for and exploiting behavioral biases in public markets
CHARLOTTESVILLE, Virginia and LONDON, Nov. 7, 2019 /PRNewswire/ -- Thorpe Abbotts Capital today announces its official launch. Thorpe Abbotts Capital aims to generate alpha by identifying behavioral mispricings in public markets. The company strives to find situations where crowd wisdom has failed, and the price of a security has deviated too far from its intrinsic value. Utilizing CEO Jeff Henriksen's background in behavioral economics, corporate valuation, and quantitative finance, Thorpe Abbotts Capital will be powered by algorithms used to identify potential behavioral mispricing opportunities. These algorithms will then be matched by fundamental analysis to scrutinize and identify whether a systematic bias has occurred in the market pricing mechanism. The approach is founded on ideas from leading psychologists and behavioral economists like Daniel Kahneman, Richard Thaler, and the late Amos Tversky.
Jeff Henriksen, Founder and CEO said, "While many managers view today's market as fairly valued, or even overvalued, when we look at the market, we see an increasing amount of behavioral bias reflected in the prices of many small and mid-cap companies. We believe there is more opportunity today than meets the eye. Much of this is driven by the shift to passive investing that has left many companies underfollowed and ripe for pricing that reflects biased expectations. From Brexit to the ongoing US/Chinese trade dispute, we are living in highly volatile times that make the market prone to knee-jerk reactions. By adopting our well-honed behavioral economic analysis, informed by a combination of dedicated human research and our proprietary algorithms, we are confident that we can cut through the noise and the madness of the crowd to recognize intrinsic value where others have failed to do so."
Jeff Henriksen has a background in portfolio management and corporate valuation and sits as an Associate Fellow at the University of Oxford's Saïd Business School. He is joined by Co-founder Robert Leedom, who serves as Head of Quantitative Research, and Moses Soussis, a colleague of Jeff's from the University of Oxford's Executive MBA Program.
Thorpe Abbotts Capital does not start its analysis looking for 'cheap' stocks, rather the focus is on identifying situations most likely suffer from behavioral biases that result in the mispricing of publicly traded securities. Launching in a market environment that is highly uncertain and volatile, Thorpe Abbotts Capital is confident that its unique combination of behavioral economics, quantitative finance, and fundamental analysis will give the fund a significant advantage.
The firm will be sector agnostic and will deploy most of its capital in the US, with allocations also going to the UK, Canada, and Europe as opportunities arise.
Robert Leedom, Founder and Head of Quantitative Research said, "We are confident that our approach will yield noticeable market beating returns. Our technology is wholly proprietary and provides us with a huge competitive advantage. However, our key differentiator is how we use our expertise in behavioral economics to interpret the data and make decisions that will deliver excellent returns to our investors."
MJ Hudson advised Thorpe Abbotts Capital as lead legal counsel.
About Thorpe Abbotts Capital
Thorpe Abbotts Capital was founded on the idea that human behavior is largely the result of an evolutionary design based on the need to survive in the wild, not to optimize decisions under uncertainty. Behavioral biases that aided our evolutionary needs are therefore ingrained in our DNA. These biases are the root cause of mispricing in security markets. Thorpe Abbotts Capital has developed algorithms and approaches to identify these mispricings and benefit from taking the other side of the transaction.
