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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Three-Factor and Five-Factor Models: Implementation of Fama and French Model on Market Overreaction Conditions
TL;DR: In this article, the authors test the ability of the CAPM model to explain the returns of portfolios formed under market overreaction conditions, and they conclude that the three-factor model is more accurate than the five factor model.
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The influence of mobile trading on return dispersion and herding behavior
TL;DR: In this paper , a modified empirical model was proposed to examine equity return dispersion and herding behavior, which showed that mobile trading would make the market herd more, and the effect is not driven by mobile traders' characteristic preferences or the market bubble and crash.
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Did the value premium survive the subprime credit crisis
TL;DR: In this article, the authors provide evidence that value stocks significantly underperformed growth stocks during the subprime credit crisis, despite a positive value premium before the crisis, suggesting it was due to the adverse influence of the crisis rather than confounding effects.
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Forecasting Islamic equity indices alpha
TL;DR: In this article, the authors investigated whether Islamic and conventional equity indices offer some alpha and showed that the Shari'ah-compliant investment fund's alpha must be adjusted with the respective benchmark index alpha to measure the fund manager's skill performance quantitatively.
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Monetary policy shocks and distressed firms’ stock returns: Evidence from the publicly traded U.S. firms
Seon Tae Kim,Luca Rescigno +1 more
TL;DR: The authors study U.S. firms' stock-return sensitivities to monetary policy shocks over the 2001-2015 period and find that expansionary monetary shocks disproportionately increase returns of a distressed firm which has profit substantially smaller than its interest expense and is in need of external financing.
References
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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.
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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.
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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
Lieven De Moor,Piet Sercu +1 more