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
Citations
More filters
Journal ArticleDOI
Evaluating asset pricing models: A revised factor model for China
Zhiyong Li,Xiao Rao +1 more
TL;DR: Li et al. as discussed by the authors developed a revised factor model, accounting for unique features of Chinese markets, and evaluate the performance of competing asset pricing models, which has the smallest model specification errors and the best explanatory power among various constructed portfolios.
Posted Content
Anchoring on Past Fundamentals
Posted Content
Informed Bank Debt and Stock Returns
Lifeng Gu,Bing Han,Tong Li +2 more
TL;DR: In this paper, the authors extract banks' private information from term loan spreads and find that abnormal loan spreads significantly predict firms' future operating performance and uncertainty measures, and also negatively predict stock returns of borrowers' peer firms.
Journal ArticleDOI
Factor Investing and Risk Management: Is Smart-Beta Diversification Smart?
TL;DR: In this paper, the authors investigate the diversification benefits associated with factor investing in U.S. stock markets, using the dummy-variable framework for asset allocation, and find that the correlations between the pure premiums of the 14 factor-based strategies considered are small, which suggests that diversification across smart-beta funds is beneficial.
References
More filters
Journal ArticleDOI
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.
Journal ArticleDOI
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.
Journal ArticleDOI
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).
Related Papers (5)
CAPM tests and alternative factor portfolio composition: getting the alphas right
Lieven De Moor,Piet Sercu +1 more