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
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Don’t Hide Your Light Under a Bushel: Innovative Originality and Stock Returns
TL;DR: In this paper, the authors propose that firms with greater innovative originality will be undervalued, especially for firms with higher valuation uncertainty, lower attention, and greater sensitivity of future profitability to IO.
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Government debt and the returns to innovation
TL;DR: In this paper, the authors show that high-R&D firms are more exposed to government debt and pay higher expected returns than low&D-Firms, and that higher levels of the debt-to-GDP ratio predict higher risk premiums for high&F firms, while rises in the cost of capital for innovationintensive firms predict declines in subsequent productivity and economic growth.
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Do Anomalies Exist Ex Ante
TL;DR: In this article, accounting-based expected returns for dollar neutral long-short trading strategies formed on a wide array of anomaly variables, including book-to-market, size, composite issuance, net stock issues, abnormal investment, asset growth, investment-to assets, accruals, earnings surprises, failure probability, return on assets, and short-term prior returns.
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How Do Factor Premia Vary Over Time? A Century of Evidence
Antti Ilmanen,Ronen Israel,Tobias J. Moskowitz,Tobias J. Moskowitz,Ashwin K Thapar,Franklin Wang +5 more
TL;DR: This article examined four prominent factors across six asset classes over a century and identified meaningful time variation in factor risk-adjusted returns that appears unrelated to macroeconomic risks, supporting other theories of dynamic return premia.
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A Protocol for Factor Identification
TL;DR: In this paper, the authors proposed a protocol for determining which factor candidates are related to risks and which candidates were related to mean returns, and they illustrate those techniques and also propose a new instrumental variables method to resolve the errors-in-variables problem in estimating factor exposures (betas) for individual assets.
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.
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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