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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Conflict-induced forced CEO turnover and firm performance
TL;DR: In this paper, the authors examine operational and stock performance changes around forced CEO turnover caused by conflicts between corporate boards and CEOs over the strategic direction of the firm and investigate whether changes in performance can be explained by board, CEO, or firm characteristics.
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The q5 model and its consistency with the intertemporal CAPM
TL;DR: In this article, the consistency of the q 5 model of Hou et al. (2019, 2020) with Merton's (1973) intertemporal capital asset pricing model (ICAPM) framework was tested.
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Normative Portfolio Theory
Yufen Fu,George Blazenko +1 more
TL;DR: In this paper, the authors jointly control the ill-behaviour of mean-variance weights and outperform 1/N/th investing with two equity allocation methods that moderate or eliminate the adverse impact of estimation-risk on portfolio weights.
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On Industry Momentum Strategies
Klaus Grobys,James W. Kolari +1 more
TL;DR: In this article, the authors investigate industry momentum strategies and find that those that outperform in the previous month generate on average significantly higher returns in the holding period than those that underperformed.
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What difference do the new factor models make in portfolio allocation
TL;DR: The authors examined the economic implications of new factor models and showed that the Hou, Xue, and Zhang (HXZ, 2015a) four-factor model outperforms the Fama and French (FF5, 2015b) five-factor models for investing in anomalies in and out-of-sample.
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
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