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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Characteristic-Based Benchmark Returns and Corporate Events
TL;DR: In this paper, the authors propose that the expected returns estimated from the broad stock market based on firm characteristics provide a useful benchmark for assessing whether returns to certain stocks are abnormal, and demonstrate that the apparently abnormal returns after eight important events, including credit rating and analyst recommendation downgrades, initial and seasoned public equity offerings, mergers and acquisitions, dividend initiations, share repurchases and stock splits, are substantially reduced or eliminated when event stock returns are compared to characteristic-based expected returns.
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Competition, profitability, and discount rates
Winston Dou,Yan Ji,Wei Wu +2 more
TL;DR: In this article, an asset-pricing model with dynamic strategic competition is proposed to explain the strong joint fluctuations in aggregate discount rates, competition intensity, profitability, and asset prices.
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Production Networks and Stock Returns: The Role of Vertical Creative Destruction
TL;DR: This article examined empirically and theoretically the relation between firms' risk and their distance to consumers in a production network and found that firms that are further away from consumers have higher risk premia and higher exposures to aggregate productivity.
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Alternative Risk Premia: What Do We Know?
TL;DR: The concept of alternative risk premia as discussed by the authors is an extension of the factor investing approach, which consists in building long-only equity portfolios, which are directly exposed to common risk factors like size, value or momentum.
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Tail risk and expected stock returns around the world
TL;DR: Li et al. as mentioned in this paper constructed three proxies for tail risk observed in 39 markets between 1980 and 2015 to examine its effects on global pricing: TRKJ, following Kelly and Jiang (2014), TRVZ, following Van Oordt and Zhou (2016), and TRHL, following Huang et al (2012) and Long et al
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