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Author: Jae H. Kim
Publisher:
ISBN:
Category :
Languages : en
Pages : 35
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Book Description
This paper examines return predictability of the U.S. stock market using portfolios sorted by size, book-to-market ratio, and industry. A novel panel variance ratio test is proposed and employed to evaluate time-varying return predictability from 1964 to 2011. It is found that the stock returns have been highly predictable from 1964 to 1996, except for a period around the 1987 stock market crash. After 1997, the stock returns have been unpredictable overall. At a disaggregated level, size and technology have been the major contributors to cross-sectional differences in informational efficiency.
Author: Jae H. Kim
Publisher:
ISBN:
Category :
Languages : en
Pages : 35
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Book Description
This paper examines return predictability of the U.S. stock market using portfolios sorted by size, book-to-market ratio, and industry. A novel panel variance ratio test is proposed and employed to evaluate time-varying return predictability from 1964 to 2011. It is found that the stock returns have been highly predictable from 1964 to 1996, except for a period around the 1987 stock market crash. After 1997, the stock returns have been unpredictable overall. At a disaggregated level, size and technology have been the major contributors to cross-sectional differences in informational efficiency.
Author: Sebastian Binder
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
This thesis contributes to existing literature by providing a comprehensive analysis of value investing strategies in crisis periods. Therefore, a U.S. stock investment universe is tested in the period 7/1990 - 12/2014. Six different multiples (3 enterprise-value based and 3 equity-value based) are tested for value premiums. Results indicate that all six return positive and statistically significant value premiums ranging between 0.75% and 1.92%. EV-based multiples appear to provide a better performance than M-based ratios. In addition, more aggregate value drivers like Sales or EBITDA perform better than net income or EBIT. It is shown that value premiums are mainly driven by strong return contribution of growth stocks during crisis periods. However, on average value premiums are positive during crisis and non-crisis periods. Size sort, imply that especially small growth stocks and partly value stocks are prone to financial constraints during financial crisis. In market crisis, growth stocks in general underperform strongly. Value premiums are robust to seasonal effects. In addition, value investing strategies are able to generate positive alpha returns in multivariate risk factors models like CAPM, three-factor, four-factor and five-factor model. However, transaction costs and artificial market frictions through legal regulations can impose high hurdles to value investors.
Author: Matthias Burghardt
Publisher: Springer Science & Business Media
ISBN: 3834961701
Category : Business & Economics
Languages : en
Pages : 170
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Book Description
Using a unique data set consisting of more than 36.5 million submitted retail investor orders over the course of five years, Matthias Burghardt constructs an innovative retail investor sentiment index. He shows that retail investors’ trading decisions are correlated, that retail investors are contrarians, and that a profitable trading strategy can be based on these aggregated sentiment measures.
Author: Leland E. Farmer
Publisher:
ISBN:
Category : Portfolio management
Languages : en
Pages : 49
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Book Description
Return predictability in the U.S. stock market is local in time as short periods with significant predictability ('pockets') are interspersed with long periods with little or no evidence of return predictability. We document this empirically using a flexible non-parametric approach and explore possible explanations of this finding, including time-varying risk premia. We find that short-lived predictability pockets are inconsistent with a broad class of affine asset pricing models. Conversely, pockets of return predictability are more in line with a model with investors' incomplete learning about a highly persistent growth component in the underlying cash flow process which undergoes occasional regime shifts.
Author: Huafeng (Jason) Chen
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
We develop a daily measure of average stock variance and study whether it can predict market returns one day ahead. Using a time-invariant prediction model we find a robust predictive relation between these variables which cannot be used to profitably time the market. A closer look reveals that the strength and even the direction of the predictive relation vary significantly over short periods of time. Moreover, a simple timing strategy that exploits this variation over time significantly outperforms the market buy-and-hold strategy in terms of the mean-variance tradeoff. The evidence shows that predictability is stronger during business-cycle contractions and that our timing strategy is profitable because it avoids losses during bad times. Last, parameter breaks occur very frequently over short periods of time, and not only when the economy switches the phase of the business cycle. Our results suggest that idiosyncratic risk matters in asset pricing and that its effect is time varying.
Author: Alberto Alesina
Publisher: Cambridge University Press
ISBN: 9780521436205
Category : Business & Economics
Languages : en
Pages : 302
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Book Description
This book develops an integrated approach to understanding the American economy and national elections. Economic policy is generally seen as the result of a compromise between the President and Congress. Because Democrats and Republicans usually maintain polarized preferences on policy, middle-of-the-road voters seek to balance the President by reinforcing in Congress the party not holding the White House. This balancing leads, always, to relatively moderate policies and, frequently, to divided government. The authors first outline the rational partisan business cycle, where Republican administrations begin with recession, and Democratic administrations with expansions, and next the midterm cycle, where the President's party loses votes in the mid-term congressional election. The book argues that both cycles are the result of uncertainty about the outcome of presidential elections. Other topics covered include retrospective voting on the economy, coat-tails, and incumbency advantage. A final chapter shows how the analysis sheds light on the economies and political processes of other industrial democracies.
Author: Justus Heuer
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Author: Puneet Handa
Publisher:
ISBN:
Category :
Languages : en
Pages : 55
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Book Description
This paper provides evidence on the economic significance of U.S. stock return predictability within an asset allocation framework in a real-time context. We examine the performance of a Bayesian, risk averse investor (the mutual fund investor) who relies on conditioning information (e.g., dividend yield, T-bill yield, default spread and term spread) to forecast future returns, and contrast it with that of an otherwise identical investor who believes that the returns are i.i.d. (the i.i.d. investor). Our major finding is that the relative performance of the mutual fund strategy is unstable over time, being noticeably poor during the most recent sub-period (1989-2002). In marked contrast, the performance of the mutual fund strategy is significantly better when it relies on a model-based approach, characterized by varying degrees of prior confidence in the CAPM.
Author: Keunsoo Kim
Publisher:
ISBN:
Category :
Languages : en
Pages : 43
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Book Description
An examination of the Shiller cyclically adjusted pricing-earnings (CAPE) ratio reveals its forecasting power for 12-month CRSP equally weighted (EW) excess returns and value weighted (VW) excess returns. The 12-month EW excess returns following low CAPE ratios are, on average, 20.7% higher than those following high CAPE ratios for the period of 1927-2016. This dichotomy in the Shiller CAPE ratio has a more reliable predictability than the January barometer. Previous studies report that the Halloween indicator was weak or negative in the US stock market prior to the 1950s. We find that the Halloween effect is strongly present following high CAPE ratios, even for the period of 1926-1971. Our results recommend a practical investment strategy. More specifically, if the CAPE ratio in September is lower than the 36-month median of the CAPE ratio, invest in stock markets from November to October of the following year; otherwise, invest for six months from November to April and sell in May and go away.
Author: Thomas Nitschka
Publisher:
ISBN:
Category :
Languages : en
Pages : 34
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Book Description
