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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Re-examining the Chinese A-share herding behaviour with a Fama-French augmented seven-factor model
Chao Li,Zongyi Hu,Liwei Tang +2 more
TL;DR: This paper proposed a new weighted cross-sectional variance (WCSV) model to re-examine the level of herding behavior in the Chinese A-s and found that the weighted CSV model is more robust to herding behaviour in Chinese A -s.
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Factor Performance 2010–2019: A Lost Decade?
TL;DR: The factors in the widely used Fama-French model experienced a negative average return during the 2010-2019 period as discussed by the authors, which was remarkably similar to the 1990-1999 period.
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Moving average distance as a predictor of equity returns
TL;DR: The distance between short and long-run moving averages of prices (MAD) predicts future equity returns in the cross-section as mentioned in this paper, and the predictability goes beyond momentum, 52-week highs, profitability, and other prominent anomalies.
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A Supply and Demand Approach to Equity Pricing
TL;DR: In this article, a frictionless neoclassical model of financial markets is presented, in which firm sizes, stock returns, and the pricing kernel are all endogenously determined, parsimoniously specifying the supply and demand of financial capital allocated to each firm and providing general equilibrium sizes and returns in closed form.
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Replicating Anomalies in China
TL;DR: Wang et al. as mentioned in this paper constructed 231 anomalies based on stock trading data and financial statement data in China's A-share stock market and found that 41 anomalies are significant at the 5% level (the absolute t-value ≥ 1.96) from 2000 to 2017.
References
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Journal ArticleDOI
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
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