Digesting Anomalies: An Investment Approach
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24,874 citations
"Digesting Anomalies: An Investment ..." refers background or methods or result in this paper
...675 [16:13 2/2/2015 RFS-hhu068.tex] Page: 676 650–705 to capture, as well as the 25 size and book-to-market portfolios, which are the key testing portfolios for Fama and French (1993, 1996).12 3.2.1 Earnings momentum (SUE-1) and price momentum (R6-6)....
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...Following Fama and French (2008), at the end of June of year t , we measure net stock issues (NSI) as the natural log of the ratio of the split-adjusted shares outstanding at the fiscal year ending in calendar year t −1 to the split-adjusted shares outstanding at the fiscal year ending in t −2....
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...Because of transaction costs and lack of liquidity, the portion of anomalies in microcaps is unlikely to be exploitable in practice.10 When constructing annually sorted testing portfolios, such as the book-tomarket deciles, we follow the Fama and French (1993) timing....
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...This interpretation is weaker than the risk factors interpretation per Fama and French (1993, 1996)....
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...As shown in Fama and French (2008), despite accounting for about 60% of the total number of stocks, microcaps are on average only about 3% of the market capitalization of the NYSE-Amex-NASDAQ universe....
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14,171 citations
"Digesting Anomalies: An Investment ..." refers background in this paper
...Fisher (1930) and Fama and Miller (1972, Figure 2.4) show that the interest rate and investment are negatively correlated. As noted, Cochrane (1991) and Liu, Whited, and Zhang (2009) extend this insight into a dynamic world with uncertainty....
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...Fisher (1930) and Fama and Miller (1972, Figure 2....
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10,806 citations
"Digesting Anomalies: An Investment ..." refers background in this paper
...1 See, for example, Ball and Brown (1968); Bernard and Thomas (1990); Ritter (1991); Jegadeesh and Titman (1993); Ikenberry, Lakonishok, and Vermaelen (1995); Loughran and Ritter (1995); © The Author 2014....
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...…(6-month prior returns, R6-6 Price momentum (6-month prior returns, 1-month holding period), 6-month holding period), Jegadeesh and Titman (1993) Jegadeesh and Titman (1993) R11-1 Price momentum (11-month prior returns, I-Mom Industry momentum, 1-month holding period), Moskowitz and…...
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...…(1996) R6-1 Price momentum (6-month prior returns, R6-6 Price momentum (6-month prior returns, 1-month holding period), 6-month holding period), Jegadeesh and Titman (1993) Jegadeesh and Titman (1993) R11-1 Price momentum (11-month prior returns, I-Mom Industry momentum, 1-month holding…...
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7,032 citations
"Digesting Anomalies: An Investment ..." refers background or methods in this paper
...As such, firms with high long-term prior returns should invest more and earn lower expected returns than firms with low long-term prior returns, meaning that the investment channel also helps interpret the De Bondt and Thaler (1985) long-term reversal effect....
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...To capture the De Bondt and Thaler (1985) long-term reversal (Rev) effect, at the beginning of each month t, we use NYSE breakpoints to split stocks into deciles based on the prior returns from month t − 60 to t − 13....
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...To be comprehensive, we cover all the major 663 [16:13 2/2/2015 RFS-hhu068.tex] Page: 664 650–705 Table 2 List of anomalies Panel A: Momentum SUE-1 Earnings surprise (1-month holding period), SUE-6 Earnings surprise (6-month holding period), Foster, Olsen, and Shevlin (1984) Foster, Olsen, and Shevlin (1984) Abr-1 Cumulative abnormal stock returns Abr-6 Cumulative abnormal stock returns around earnings announcements around earnings announcements (1-month holding period), (6-month holding period), Chan, Jegadeesh, and Lakonishok (1996) Chan, Jegadeesh, and Lakonishok (1996) RE-1 Revisions in analysts’ earnings forecasts RE-6 Revisions in analysts’ earnings forecasts (1-month holding period), (6-month holding period), Chan, Jegadeesh, and Lakonishok (1996) Chan, Jegadeesh, and Lakonishok (1996) R6-1 Price momentum (6-month prior returns, R6-6 Price momentum (6-month prior returns, 1-month holding period), 6-month holding period), Jegadeesh and Titman (1993) Jegadeesh and Titman (1993) R11-1 Price momentum (11-month prior returns, I-Mom Industry momentum, 1-month holding period), Moskowitz and Grinblatt (1999) Fama and French (1996) Panel B: Value-versus-growth B/M Book-to-market equity, A/ME Market leverage, Bhandari (1988) Rosenberg, Reid, and Lanstein (1985) Rev Reversal, De Bondt and Thaler (1985) E/P Earnings-to-price, Basu (1983) EF/P Analysts’ earnings forecasts-to-price, CF/P Cash flow-to-price, Elgers, Lo, and Pfeiffer (2001) Lakonishok, Shleifer, and Vishny (1994) D/P Dividend yield, O/P Payout yield, Litzenberger and Ramaswamy (1979) Boudoukh et al. (2007) NO/P Net payout yield, SG Sales growth, Boudoukh et al. (2007) Lakonishok, Shleifer, and Vishny (1994) LTG Long-term growth forecasts of analysts, Dur Equity duration, La Porta (1996) Dechow, Sloan, and Soliman (2004) Panel C: Investment ACI Abnormal corporate investment, I/A Investment-to-assets, Titman, Wei, and Xie (2004) Cooper, Gulen, and Schill (2008) NOA Net operating assets, PI/A Changes in property, plant, and equipment Hirshleifer et al. (2004) plus changes in inventory scaled by assets, Lyandres, Sun, and Zhang (2008) IG Investment growth, Xing (2008) NSI Net stock issues, Pontiff and Woodgate (2008) CEI Composite issuance, NXF Net external financing, Daniel and Titman (2006) Bradshaw, Richardson, and Sloan (2006) IvG Inventory growth, Belo and Lin (2011) IvC Inventory changes, Thomas and Zhang (2002) OA Operating accruals, Sloan (1996) TA Total accruals, Richardson et al. (2005) POA Percent operating accruals, PTA Percent total accruals, Hafzalla, Lundholm, and Van Winkle (2011) Hafzalla, Lundholm, and Van Winkle (2011) Panel D: Profitability ROE Return on equity, ROA Return on assets, Haugen and Baker (1996) Balakrishnan, Bartov, and Faurel (2010) RNA Return on net operating assets, PM Profit margin, Soliman (2008) Soliman (2008) ATO Asset turnover, Soliman (2008) CTO Capital turnover, Haugen and Baker (1996) GP/A Gross profits-to-assets, Novy-Marx (2013) F F -score, Piotroski (2000) TES Tax expense surprise, TI/BI Taxable income-to-book income, Thomas and Zhang (2011) Green, Hand, and Zhang (2013) RS Revenue surprise, NEI Number of consecutive quarters with earnings Jegadeesh and Livnat (2006) increases, Barth, Elliott, and Finn (1999) FP Failure probability, O O-score, Dichev (1998) Campbell, Hilscher, and Szilagyi (2008) (continued) 664 [16:13 2/2/2015 RFS-hhu068.tex] Page: 665 650–705 This table lists the anomalies that we study....
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...As such, firms with high long-term prior returns should invest more and earn lower expected returns than firms with low longterm prior returns, meaning that the investment channel also helps interpret the De Bondt and Thaler (1985) long-term reversal effect....
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...…B: Value-versus-growth B/M Book-to-market equity, A/ME Market leverage, Bhandari (1988) Rosenberg, Reid, and Lanstein (1985) Rev Reversal, De Bondt and Thaler (1985) E/P Earnings-to-price, Basu (1983) EF/P Analysts’ earnings forecasts-to-price, CF/P Cash flow-to-price, Elgers, Lo, and…...
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6,737 citations
"Digesting Anomalies: An Investment ..." refers background or methods or result in this paper
...675 [16:13 2/2/2015 RFS-hhu068.tex] Page: 676 650–705 to capture, as well as the 25 size and book-to-market portfolios, which are the key testing portfolios for Fama and French (1993, 1996).12 3.2.1 Earnings momentum (SUE-1) and price momentum (R6-6)....
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...This interpretation is weaker than the risk factors interpretation per Fama and French (1993, 1996)....
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...Consistent with Fama and French (1993, 1996), our factor regressions provide direct evidence that the q-factors capture shared variation in returns across a wide array of anomaly portfolios....
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...Following MacKinlay (1995), 13 The small-growth anomaly is notoriously difficult to capture (e.g., Fama and French 1993, 1996; Davis, Fama, and French 2000; and Campbell and Vuolteenaho 2004)....
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...…and Titman (1993) R11-1 Price momentum (11-month prior returns, I-Mom Industry momentum, 1-month holding period), Moskowitz and Grinblatt (1999) Fama and French (1996) Panel B: Value-versus-growth B/M Book-to-market equity, A/ME Market leverage, Bhandari (1988) Rosenberg, Reid, and Lanstein…...
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