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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An Augmented q-Factor Model with Expected Growth
TL;DR: The q5 model as discussed by the authors augments the Hou-Xue-Zhang (2015) q-factor model with the expected growth factor, which shows strong explanatory power in the cross section and outperforms the Fama-French (2018) 6-Factor model.
Journal ArticleDOI
Size and Value in China
TL;DR: In this paper, a three-factor model is proposed to explain most reported Chinese anomalies, including profitability and volatility anomalies, which strongly dominates a model formed by just replicating the Fama and French (1993) procedure.
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The Pollution Premium
TL;DR: In this paper, the authors study the asset pricing implications of industrial pollution and find that a long-short portfolio constructed from firms with high versus low toxic emission intensity within a given industry generates an average return of 4.42% per annum, which remains significant after controlling for risk factors.
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Cross-Sectional Asset Pricing with Individual Stocks: Betas versus Characteristics *
TL;DR: The authors developed a methodology for estimating bias-corrected premium estimates from cross-sectional regressions of individual stock returns on time-varying conditional betas, and found evidence of a positive risk premium on the size and momentum factors, but no evidence for the book-to-market and market factors.
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Research in finance: a review of influential publications and a research agenda
TL;DR: The authors used bibliographic mapping to identify the fifty most influential articles in the Tier 1 Finance journals since their inception, and visualize the conceptual interrelations among them, and set an agenda for finance research in the 21st century.
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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