Open AccessPosted Content
Digesting Anomalies: An Investment Approach
Kewei Hou,Chen Xue,Lu Zhang +2 more
TLDR
In this paper, the authors proposed a new factor model that consists of the market factor, a size factor, an investment factor, and a return-on-equity factor.Abstract:
Motivated from investment-based asset pricing, we propose a new factor model that consists of the market factor, a size factor, an investment factor, and a return-on-equity factor The new model [i] outperforms the Carhart (1997) four-factor model in pricing portfolios formed on earnings surprise, idiosyncratic volatility, financial distress, equity issues, as well as on investment and return-on-equity; [ii] performs similarly as the Carhart model in pricing portfolios on momentum as well as on size and book-to-market; but [iii] underperforms in pricing the total accrual deciles Our model's performance, combined with its clear economic intuition, suggests that it can serve as a new workhorse model for academic research and investment management practiceread more
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Are Capital Market Anomalies Common to Equity and Corporate Bond Markets? An Empirical Investigation
Tarun Chordia,Amit Goyal,Yoshio Nozawa,Avanidhar Subrahmanyam,Avanidhar Subrahmanyam,Qing Tong +5 more
TL;DR: The authors investigated whether financial statement characteristics and other variables that predict equity returns also predict corporate bond returns and found that the evidence indicates that corporate bond return conforms with the risk-reward paradigm.
Posted Content
Why Does Fast Loan Growth Predict Poor Performance for Banks
TL;DR: In this article, the authors show that the performance of fast growing banks is not explained by merger activity and loan growth through mergers is not accompanied by the same poor loan performance.
ReportDOI
Factors That Fit the Time Series and Cross-Section of Stock Returns
Martin Lettau,Markus Pelger +1 more
TL;DR: This paper proposed a new method for estimating latent asset pricing factors that fit the time-series and cross-section of expected returns, which generalizes Principal Component Analysis (PCA) by including a penalty on the pricing error in expected returns.
Crash Sensitivity and Cross-Section of Expected Stock Returns
TL;DR: In this article, the authors examined whether investors receive compensation for holding crash-sensitive stocks and found that stocks with weak LTD serve as a hedge during crises, but, overall, stocks with strong LTD have higher average future returns.
Journal ArticleDOI
New evidence on economic policy uncertainty and equity premium
TL;DR: In this paper, the authors test the hypothesis that China's economic policy uncertainty (EPU) commands a positive equity premium and find stocks with higher EPU betas earn higher average returns, and the EPU factormimicking portfolio earns significant abnormal returns.
References
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Common risk factors in the returns on stocks and bonds
Eugene F. Fama,Kenneth R. French +1 more
TL;DR: In this article, the authors identify five common risk factors in the returns on stocks and bonds, including three stock-market factors: an overall market factor and factors related to firm size and book-to-market equity.
Journal ArticleDOI
Risk, Return, and Equilibrium: Empirical Tests
Eugene F. Fama,James D. MacBeth +1 more
TL;DR: In this article, the relationship between average return and risk for New York Stock Exchange common stocks was tested using a two-parameter portfolio model and models of market equilibrium derived from the two parameter portfolio model.
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Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency
TL;DR: In this article, the authors show that strategies that buy stocks that have performed well in the past and sell stocks that had performed poorly in past years generate significant positive returns over 3- to 12-month holding periods.
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Does the Stock Market Overreact
TL;DR: In this article, a study of market efficiency investigates whether people tend to "overreact" to unexpected and dramatic news events and whether such behavior affects stock prices, based on CRSP monthly return data, is consistent with the overreaction hypothesis.
Journal ArticleDOI
Multifactor Explanations of Asset Pricing Anomalies
Eugene F. Fama,Kenneth R. French +1 more
TL;DR: In this article, the authors show that many of the CAPM average-return anomalies are related, and they are captured by the three-factor model in Fama and French (FF 1993).
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CAPM tests and alternative factor portfolio composition: getting the alphas right
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