Showing papers on "Stock (geology) published in 2016"
TL;DR: In this paper, the authors study the out-of-sample and post-publication return predictability of 97 variables shown to predict cross-sectional stock returns and find that publication-informed trading results in a lower return.
Abstract: We study the out-of-sample and post-publication return predictability of 97 variables shown to predict cross-sectional stock returns. Portfolio returns are 26% lower out-of-sample and 58% lower post-publication. The out-of-sample decline is an upper bound estimate of data mining effects. We estimate a 32% (58%–26%) lower return from publication-informed trading. Post-publication declines are greater for predictors with higher in-sample returns, and returns are higher for portfolios concentrated in stocks with high idiosyncratic risk and low liquidity. Predictor portfolios exhibit post-publication increases in correlations with other published-predictor portfolios. Our findings suggest that investors learn about mispricing from academic publications.
993 citations
TL;DR: In this paper, a five-factor model that adds profitability (RMW) and investment (CMA) factors to the three factor model of Fama and French (1993) suggests a shared story for several average-return anomalies.
Abstract: A five-factor model that adds profitability (RMW) and investment (CMA) factors to the three-factor model of Fama and French (1993) suggests a shared story for several average-return anomalies. Specifically, positive exposures to RMW and CMA (stock returns that behave like those of profitable firms that invest conservatively) capture the high average returns associated with low market β, share repurchases, and low stock return volatility. Conversely, negative RMW and CMA slopes (like those of relatively unprofitable firms that invest aggressively) help explain the low average stock returns associated with high β, large share issues, and highly volatile returns.
484 citations
TL;DR: In this paper, the impact of economic policy uncertainty on stock markets in the United States over the period 1900-2014 was studied and it was shown that an increase in policy uncertainty reduces significantly stock returns and that this effect is stronger and persistent during extreme volatility periods.
295 citations
TL;DR: In this article, the authors study the relationship between corporate governance and firms' environmental innovation, and find that worse governed firms generate fewer green patents relative to all their innovations, and that the negative effect is greater for firms with smaller share of institutional ownership, with a smaller stock of green patents and with more binding financial constraints.
250 citations
TL;DR: In this article, the authors examined the asymmetric impact of gold prices, oil prices and their associated volatilities on stock markets of emerging economies and found that the stock markets in the emerging economies are more vulnerable to bad news and events that result in uncertain economic conditions.
227 citations
TL;DR: In this paper, the authors investigated the long term relationship of stock prices of alternative energy companies with oil prices in a multivariate framework using threshold cointegration tests, which endogenously incorporate possible regime shifts in long run relationship of underlying variables.
218 citations
TL;DR: The authors explored the dependence between real crude oil price changes and Chinese real industry stock market returns based on the monthly data from 1994/03 to 2014/06 and found that the reaction of market returns to crude oil is highly heterogeneous across conditional distribution of industry stock returns.
207 citations
TL;DR: The authors applied a bootstrap rolling-window causality test to assess the causal relationship between economic policy uncertainty (EPUE) and stock returns in China and India, and found that there are bidirectional causal relationships between EPU and stock return in several sub-periods rather than in the whole sample period.
Abstract: This article applies a bootstrap rolling-window causality test to assess the causal relationship between economic policy uncertainty (EPU) and stock returns in China and India. Empirical literature examining causality between two time series may suffer from inaccurate results when the underlying full-sample time series have structural changes. However, the bootstrap rolling-window approach enables us to identify possible time-varying causalities between time series based on sub-sample data. Using a twenty-four-months rolling window over the period 1995:02 to 2013:02 in China and 2003:02–2013:02 in India, we do find that there are bidirectional causal relationships between EPU and stock returns in several sub-periods rather than in the whole sample period. However, the association between EPU and stock returns is, in general, weak for these two emerging countries. Our findings have important implications for policy makers and investors.
172 citations
TL;DR: The authors investigated the role of economic uncertainty in the cross-sectional pricing of individual stocks and equity portfolios and found that stocks with the lowest uncertainty beta generate 6% more annualized risk-adjusted return compared to stocks in the highest uncertainty beta decile.
Abstract: We investigate the role of economic uncertainty in the cross-sectional pricing of individual stocks and equity portfolios. We estimate stock exposure to an economic uncertainty index and show that stocks in the lowest uncertainty beta decile generate 6% more annualized risk-adjusted return compared to stocks in the highest uncertainty beta decile. We find that the uncertainty premium is driven by the outperformance (underperformance) by stocks with negative (positive) uncertainty beta. Our results indicate that uncertainty-averse investors demand extra compensation to hold stocks with negative uncertainty beta and they are willing to pay high prices for stocks with positive uncertainty beta.
171 citations
Book•
18 Jan 2016
TL;DR: In this paper, the forecasting power of the breadth of ownership of Portuguese mutual funds on stock returns was analyzed using a model with differences of opinion and short-sales constraints similar to that of Chen et al.
Abstract: This book focuses on the forecasting power of breadth of ownership of Portuguese mutual funds on stock returns. Majority of studies tend to focus on the markets of China and the United States. We utilize a model with differences of opinion and short-sales constraints similar to that of Chen et al. (2002). Using data on mutual fund holdings we find that stocks with the largest negative changes in breadth tend to significantly underperform stocks with the largest positive changes in breadth in short horizons of one month and one quarter. However, the results are mixed when looking at longer horizons. We also find evidence to show that short-sales constraints matter for stock returns. Therefore, when short sales constraints are binding stocks prices are high when compared to fundamentals. This proves that our results are consistent with the Miller (1977) model. Further, we show that are results hold during periods of a financial crisis as well. This study also highlights that there are limits to arbitrage, as suggested by Shleifer and Vishny (1997), because of market frictions such as short-sales constraints which can lead to abnormal returns in constraint stocks.
165 citations
TL;DR: In this article, the authors test the relation between ambiguity aversion and five household portfolio choice puzzles: nonparticipation in equities, low allocations to equity, home bias, own-company stock ownership, and portfolio under-diversification.
TL;DR: This article examined institutional demand prior to well-known stock return anomalies and found that institutions have a strong tendency to buy stocks classified as overvalued (short leg of anomaly), and that these stocks have particularly negative ex post abnormal returns.
TL;DR: In this paper, the spillover effect between the U.S. market and five of the most important emerging stock markets namely those of the BRICS (Brazil, Russia, India, China and South Africa), and draws implications for portfolio risk modeling and forecasting.
TL;DR: In this article, the authors investigate whether data from Google Trends can be used to forecast stock returns and find that high Google search volumes lead to negative returns. And they also examine a trading strategy based on selling stocks with high Google Search volumes and buying stocks with infrequent Google searches.
Posted Content•
TL;DR: In this paper, the authors examined whether bank and stock market development contributes to reducing income inequality and poverty in emerging countries using dynamic panel data methods with an updated dataset for the period 1987-2011, and found that neither banks nor stock markets play a significant role in poverty reduction.
Abstract: The objective of this paper is to examine whether bank and stock market development contributes to reducing income inequality and poverty in emerging countries. Using dynamic panel data methods with an updated dataset for the period 1987–2011, we assess the finance–inequality–poverty nexus by taking the separate and simultaneous impacts of banks and stock markets into account. Mixed explanatory findings on panel studies suggest that although financial development promotes economic growth, this does not necessarily benefit those on low-incomes in emerging countries. For the finance–poverty link, we find that neither banks nor stock markets play a significant role in poverty reduction.
TL;DR: Nagel et al. as discussed by the authors test the hypothesis that, when thinking about allocating money to a stock, investors mentally represent the stock by the distribution of its past returns and then evaluate this distribution in the way described by prospect theory.
Abstract: We test the hypothesis that, when thinking about allocating money to a stock, investors mentally represent the stock by the distribution of its past returns and then evaluate this distribution in the way described by prospect theory. In a simple model of asset prices in which some investors think in this way, a stock whose past return distribution has a high (low) prospect theory value earns a low (high) subsequent return, on average. We find empirical support for this prediction in the cross-section of stock returns in the U.S. market, and also in a majority of forty-six other national stock markets. (JEL D03)Received November 19, 2014; accepted May 20, 2016, by Editor Stefan Nagel.
TL;DR: In this article, the authors used 15 years of audited returns to find convincing empirical evidence that stock returns on customer satisfaction do beat the market, and the recorded cumulative returns were 518% over the years studied, compared with a 31% increase for the S&P 500.
Abstract: A debate about whether firms with superior customer satisfaction earn superior stock returns has been persistent in the literature. Using 15 years of audited returns, the authors find convincing empirical evidence that stock returns on customer satisfaction do beat the market. The recorded cumulative returns were 518% over the years studied (2000–2014), compared with a 31% increase for the S&P 500. Similar results using back-tested instead of real returns were found in the United Kingdom. The effect of customer satisfaction on stock price is, at least in part, channeled through earnings surprises. Consistent with theory, customer satisfaction has an effect on earnings themselves. In addition, the authors examine the effect of stock returns from earnings on stock returns from customer satisfaction. If earnings returns are included among the risk factors in the asset pricing model, the earnings variable partially mitigates the returns on customer satisfaction. Because of the long time series, it is ...
TL;DR: In this article, the authors examined whether bank and stock market development contributes to reducing income inequality and poverty in emerging countries using dynamic panel data methods with an updated dataset for the period 1987-2011, and found that neither banks nor stock markets play a significant role in poverty reduction.
TL;DR: In this paper, the authors examined the impact of quantile and interquantile oil price movements on different stock return quantiles by testing the hypothesis of equality in conditional and unconditional quantile distribution functions of stock returns.
TL;DR: In this article, the authors examined the dynamic relationship between gold and stock markets using data for the BRICS counties and found that adding gold to a stock portfolio enhances its risk-adjusted return.
TL;DR: In this paper, the authors examined the dynamic relationship among local stock returns, foreign exchange rates, interest differentials, and U.S. S&P 500 returns in BRICS countries, including Brazil, Russia, India, China, and South Africa.
01 Jan 2016
TL;DR: In this article, the authors examined the relationship between managerial ownership structure and at-issue yield spreads on corpo rate bonds and found that managers' stock options have a larger effect on yield spreads than stock ownership.
Abstract: This article examines managerial ownership structure and at-issue yield spreads on corpo rate bonds. There is a positive relation between managerial ownership and borrowing costs, and this relation is weaker at higher levels of ownership. In addition, managerial stock op tions have a larger effect on yield spreads than stock ownership. These effects exist after controlling for firm and bond characteristics, and are robust to endogeneity and sample selection concerns. The evidence suggests that rational bondholders price new debt issues using the information about a firm's future risk choices contained in managerial incentive structures, and that lenders anticipate higher risk-taking incentives from managerial stock options than from equity ownership.
Posted Content•
TL;DR: In the post-1934 period, higher or rising margin requirements are associated with lower stock price volatility, lower excess volatility, and smaller deviations of stock prices from their fundamental values.
Abstract: Official margin requirements in the U.S. stock market were established in October 1934 to limit the amount of credit available for the purpose of buying stocks. Since then, higher or rising margin requirements are associated with lower stock price volatility, lower excess volatility, and smaller deviations of stock prices from their fundamental values. The results hold throughout the post-1934 period and are not very sensitive to the exclusion of the turbulent depression years from the sample. Thus margin requirements seem to be an effective policy tool in curbing destabilizing speculation. (JEL 313, 520). Federal regulation of securities margins was mandated by Congress in the Securities Exchange Act of 1934. The stock market experience of the late 1920s led Congress to the conclusion that credit-financed speculation in the stock market might create excessive market volatility through a pyramidingdepyramiding process.' Congress reasoned that the imposition of margin requirements could constrain the amount of borrowing and prevent excessive market volatility, and subsequently gave the Federal Reserve jurisdiction over the level of margin requirements. Since 1934, the Federal Reserve
TL;DR: In this paper, the authors show that exchange rate changes have asymmetric effects on stock prices, though the effects are mostly short-run, and introduce nonlinearity into adjustment process and after using Nonlinear ARDL approach to cointegration and error-correction modeling combined with monthly data from Brazil, Canada, Chile, Indonesia, Japan, Korea, Malaysia, Mexico, and the U.K.
TL;DR: In this paper, the authors investigate the time varying co-movements between crude oil and Indian stock market returns both at aggregate and sector level using weekly closing prices for Brent Crude, BSE-Sensex and seven sector indices of Bombay Stock Exchange.
TL;DR: In this article, the authors investigate the dynamics of volatility spillovers between the US economic policy uncertainty and the BRIC equity markets and find that there is strong evidence of a time-varying correlation between US economic uncertainty and stock market volatility.
TL;DR: This paper examined the adaptive market hypothesis in the S&P500, FTSE100, NIKKEI225 and EURO STOXX 50 by testing for stock return predictability using daily data from January 1990 to May 2014.
TL;DR: The authors used a dataset of more than 900,000 news stories to test whether news can predict stock returns and found that daily news predicts stock returns for only one to two days, confirming previous research.
Abstract: The authors used a dataset of more than 900,000 news stories to test whether news can predict stock returns. They measured sentiment with a proprietary Thomson Reuters neural network and found that daily news predicts stock returns for only one to two days, confirming previous research. Weekly news, however, predicts stock returns for one quarter. Positive news stories increase stock returns quickly, but negative stories receive a long-delayed reaction. Much of the delayed response to news occurs around the subsequent earnings announcement.
01 Jan 2016
TL;DR: In this paper, the authors examined long-run and short-run relationship between Lahore Stock Exchange and macroeconomic variables in Pakistan, which revealed that there was a negative impact of consumer price index on stock returns, while, industrial production index, real effective exchange rate, money supply had a significant positive effect on the stock returns in the long run and VECM analysis illustrated that the coefficients of ecml (-1), and ecm2 (-1) were significant with negative signs.
Abstract: The movements in the stock prices are an important indicator of the economy. The intention of this study was to examine long-run and short-run relationships between Lahore Stock Exchange and macroeconomic variables in Pakistan. The monthly data from December 2002 to June 2008 was used in this study. The results revealed that there was a negative impact of consumer price index on stock returns, while, industrial production index, real effective exchange rate, money supply had a significant positive effect on the stock returns in the long-run. The VECM analysis illustrated that the coefficients of ecml (-1), and ecm2 (-1) were significant with negative signs. The coefficients of both error correction terms showed high speed of adjustment. The results of variance decompositions revealed that out of five macroeconomic variables consumer price index showed greater forecast error for LSE25 Index.