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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Indian Stock Market and the Asset Pricing Models
TL;DR: In this paper, the performance of three asset pricing models, the Capital Asset Pricing Model, the three factor model of Fama and French (1993), and the five factor model (2015) on Indian stock market (an emerging economy) is compared.
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Asset Growth, Profitability, and Investment Opportunities
Ilan Cooper,Paulo F. Maio +1 more
TL;DR: The results largely legitimate the ICAPM as a common theoretical background for the new multifactor models, and several factors forecast a significant decline in stock volatility, being consistent with their prices of risk.
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A Market-Based Funding Liquidity Measure
Zhuo Chen,Andrea Lu +1 more
TL;DR: In this article, the authors construct a traded funding liquidity measure from stock returns using a stylized model and show that the expected return of a beta-neutral portfolio, which exploits investors' borrowing constraints (Black (1972)), depends on both the marketwide funding liquidity and stocks' margin requirements.
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Factors and risk premia in individual international stock returns
TL;DR: In this article, the authors proposed an estimation methodology tailored for large unbalanced panels of individual stock returns to study the factor structure and expected returns in international stock markets, and they showed that the local market is necessary to capture the factor structures in both developed and emerging markets.
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Asset Pricing in the Information Age: Employee Expectations and Stock Returns
TL;DR: In this paper, a new dataset of online employee expectations was used to show that employees' beliefs about their employers' business prospects predict future stock returns, and a long-short portfolio based on employee expectations delivers an annualized abnormal return of 8% to 11%.
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