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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Patent-to-Market Premium
TL;DR: In this paper, a patent-to-market (PTM) ratio refers to the percentage of a firm's market value that is attributable to its patent market value, and is positively associated with future profitability.
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Volatility and the Cross-Section of Equity Returns: Market Frictions vs. Arbitrage Risk
Ruslan Goyenko,Paul Schultz +1 more
TL;DR: This article showed that stocks with high idiosyncratic volatility are far more likely to be hard-to-borrow than low-i.i.d. stocks, and that the relation between volatility and returns is more accurately described as a relation between being hard to borrow and stock returns.
Posted Content
A Return Based Measure of Firm Quality
Ravi Jagannathan,Yang Zhang +1 more
TL;DR: In this article, the authors show that superior performance relative to peers during stressful times identifies higher quality firms as measured by conventional historical financial statement based measures as well as default probability measures.
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Q‐factors in empirical asset pricing: a review and synthesis
Smita Datta,Anindita Chakraborty +1 more
TL;DR: In this article, the authors synthesize studies pertaining to the four alternative explanations of the asset pricing models comprising the q-factors (profitability and investment) -the data snooping hypothesis, the risk-based explanation, the irrational investor behaviour explanation and the interpretation that suggest that the combination of the risk free asset and the factors comprising the model span the mean-variance efficient tangency portfolio that prices the universe of 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