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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Anchoring and risk factors
TL;DR: In this paper, the authors examined the extent to which their return predictability is attributable to investors' tendency to anchor on 52-week high and found that two profitability measures (operating profitability, return on equity) and two investment measures (asset growth and investment to assets) are entirely attributable to anchoring.
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A Weighted Least Squares Estimator of Factor Momentum
TL;DR: In this paper, a weighted least squares (WLS) estimator of autoregressions with time-varying volatility is used to predict stock factor returns, and the predictability transmits into superior mean-variance optimal portfolio performance that is hardly achieved by other strategies that utilize volatility timing and return predictability.
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Bootstrap Analysis of Mutual Fund Performance
TL;DR: In this article, the authors show that two prominent bootstrap tests for fund performance evaluation have distorted test sizes and lack test power to detect skilled funds when a substantial number of unskilled funds are present, and they develop the theory for a valid bootstrap Hotelling's T-squared test allowing for serial correlations and cross-sectional dependence in fund residuals.
Posted Content
When it Rains, it Pours: Multifactor Asset Management in Good and Bad Times
Marie Brière,Ariane Szafarz +1 more
TL;DR: In this article, the authors examine the profitability of multifactor portfolios on the U.S. stock market and assess the performances of factor-based asset management strategies in good and bad times.
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Asset pricing and nominal price illusion in China
P Yang,Liuqing Yang +1 more
TL;DR: Wang et al. as mentioned in this paper examined the impact of low-price premium (LPP) on the pricing of China's stock market and showed that LPP is a reliable and effective pricing component in China's A-share market, and it may be used as a systematic factor in the Chinese stock market's asset pricing model.
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