Author: Lin Zheng
Publisher:
ISBN:
Category :
Languages : en
Pages : 36
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Book Description
Using intraday transactions data including short sales, I study short-selling around quarterly earnings announcements and linkages between short sales and post earnings announcement stock returns. Short sales increase immediately after both negative and positive earnings surprises. Furthermore, patterns in shorting at subsequent surprises in series of same-sign earnings surprises suggest that short sellers exploit the consequences of other investors' behavioral biases. The results highlight motivations for short sales after earnings announcements, and illustrate how short-selling contributes to market efficiency after positive (but not negative) earnings surprises.
Author: Lin Zheng
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
In this dissertation I aim at improving the understanding of the informativeness of short-selling in the context of the motivation, the impact on future stock returns, and the relation with market efficiencies. In Chapter 1, I study short sellers' reactions after quarterly earnings announcements as well as the associations between short sales and post announcement stock returns. Short sales increase immediately after both negative and positive earnings surprises. After positive earnings surprises, short sellers appear to act as contrarians, and trade against stock price overreaction, thereby inducing price reversal in the long run. After negative earnings surprises, short sellers act as momentum traders, and trade with post earnings announcement drift. However, they are not able to fully arbitrage away the downside post earnings announcement drift. The short sellers' different reactions at subsequent surprises in a series of same-sign earnings surprises implies that short sellers exploit the consequences of other investors' behavioral biases. The results highlight the motivations and impacts for short sales after earnings announcements. In Chapter 2, I investigate the informativeness of short-selling by combining Probability of Information-based Trading measure and short sales transaction data. Short sales depress stock returns in the short run, regardless of the information asymmetry level. However, short sales can not predict future stock return in the long run if information asymmetry levels are low. Large size short sales are the most informed. When short sales constraints are more binding, short-selling is more informed, especially for the stocks with high information asymmetry levels. In Chapter 3, I examine short sales prior to merger and acquisition announcements for acquiring firms. Short-selling increases prior to stock-financed not cash-financed mergers and acquisitions. Pre-announcement abnormal short-selling is negatively related to post-announcement stock returns. Short sellers are informed of the method of payment, but not the outcome. The results also indicate that short-sellers are more active in stocks with larger firm size, lower book-to-market ratio, and higher liquidity.
Author: Soojin Yim
Publisher:
ISBN:
Category : Dividends
Languages : en
Pages : 164
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Book Description
Author: Leonard Zacks
Publisher: John Wiley & Sons
ISBN: 0470905905
Category : Business & Economics
Languages : en
Pages : 352
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Book Description
Investment pioneer Len Zacks presents the latest academic research on how to beat the market using equity anomalies The Handbook of Equity Market Anomalies organizes and summarizes research carried out by hundreds of finance and accounting professors over the last twenty years to identify and measure equity market inefficiencies and provides self-directed individual investors with a framework for incorporating the results of this research into their own investment processes. Edited by Len Zacks, CEO of Zacks Investment Research, and written by leading professors who have performed groundbreaking research on specific anomalies, this book succinctly summarizes the most important anomalies that savvy investors have used for decades to beat the market. Some of the anomalies addressed include the accrual anomaly, net stock anomalies, fundamental anomalies, estimate revisions, changes in and levels of broker recommendations, earnings-per-share surprises, insider trading, price momentum and technical analysis, value and size anomalies, and several seasonal anomalies. This reliable resource also provides insights on how to best use the various anomalies in both market neutral and in long investor portfolios. A treasure trove of investment research and wisdom, the book will save you literally thousands of hours by distilling the essence of twenty years of academic research into eleven clear chapters and providing the framework and conviction to develop market-beating strategies. Strips the academic jargon from the research and highlights the actual returns generated by the anomalies, and documented in the academic literature Provides a theoretical framework within which to understand the concepts of risk adjusted returns and market inefficiencies Anomalies are selected by Len Zacks, a pioneer in the field of investing As the founder of Zacks Investment Research, Len Zacks pioneered the concept of the earnings-per-share surprise in 1982 and developed the Zacks Rank, one of the first anomaly-based stock selection tools. Today, his firm manages U.S. equities for individual and institutional investors and provides investment software and investment data to all types of investors. Now, with his new book, he shows you what it takes to build a quant process to outperform an index based on academically documented market inefficiencies and anomalies.
Author: Valentin Dimitrov
Publisher:
ISBN:
Category :
Languages : en
Pages : 55
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Book Description
Miller (1977) hypothesizes that differences of opinion among investors about stock value result in overvaluation so long as some investors are short-sales constrained. Prior evidence on the role of differences of opinion for stock prices has not yielded convincing evidence. We test the Miller hypothesis by focusing on earnings announcements because such announcements generally reduce differences of opinion among investors and, hence, are also likely to reduce overvaluation if the Miller hypothesis is true. We provide statistically significant and economically meaningful evidence in support of the Miller hypothesis. We find that the three-day hedge returns (returns on low minus high differences of opinion stocks) around earnings announcements are 0.2749% (23% annualized) to 0.7132% (60% annualized), depending upon the proxy for differences of opinion. The results are robust to alternative explanations such as the effects of financial leverage, post-earnings-announcement-drift and earnings announcement premium. Additional analysis using institutional ownership as a proxy for short-sales constraints further strengthens our conclusions regarding the Miller hypothesis. We find that the association between differences of opinion and announcement period returns is magnified within the subsample of stocks that are most difficult for investors to sell short.
Author: Dennis Lasser
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
This paper examines the effect of the inherent demand implied by short interest by observing price reactions to earnings announcements based on the level of short interest. We find that for extreme good- and bad- news events, the inherent demand increases stock prices around the earnings announcement date, with the effect being stronger for good news relative to bad news. Specifically, the initial market reaction to an extreme positive earnings surprise is larger for firms with high levels of short interest. On the other hand, for an extreme negative earnings surprise event, the initial market reaction is smaller for heavily shorted firms. Furthermore, the initial rightward demand curve shift caused by the short sellers' reaction to an extreme good (bad) news event also results in a smaller (larger) post-earnings-announcement drift.
Author: Frank J. Fabozzi
Publisher: John Wiley & Sons
ISBN: 0471704334
Category : Business & Economics
Languages : en
Pages : 434
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Book Description
The latest theoretical and empirical evidence on short selling in the United States and throughout the world To get the most success out of what the finance community regards as a risky business, short sellers need high-level information. The Theory and Practice of Short Selling offers managers and investors the information they need to maximize and enhance their short selling capabilities for bigger profits. Frank Fabozzi collects a group of market experts who share their knowledge on everything from the basics to the complex in the world of short sales, including mechanics of short selling, the empirical evidence on short-selling, the implications or restrictions on short selling for investment strategies, short-selling strategies pursued by institutional investors, and identifying short-selling candidates. Frank J. Fabozzi, PhD, CFA (New Hope, PA), is the Frederick Frank Adjunct Professor of Finance at Yale University's School of Management and Editor of the Journal of Portfolio Management. He is the author or editor of over 100 books on finance and investing.
Author: Carsten Wehn
Publisher: Academic Press
ISBN: 0124158757
Category : Business & Economics
Languages : en
Pages : 658
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Book Description
It is widely acknowledged that many financial modelling techniques failed during the financial crisis, and in our post-crisis environment many techniques are being reconsidered. This single volume provides a guide to lessons learned for practitioners and a reference for academics. Including reviews of traditional approaches, real examples, and case studies, contributors consider portfolio theory; methods for valuing equities and equity derivatives, interest rate derivatives, and hybrid products; and techniques for calculating risks and implementing investment strategies. Describing new approaches without losing sight of their classical antecedents, this collection of original articles presents a timely perspective on our post-crisis paradigm. Highlights pre-crisis best classical practices, identifies post-crisis key issues, and examines emerging approaches to solving those issues Singles out key factors one must consider when valuing or calculating risks in the post-crisis environment Presents material in a homogenous, practical, clear, and not overly technical manner
Author: Karthik Balakrishnan
Publisher:
ISBN:
Category :
Languages : en
Pages : 64
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Book Description
We document a failure of the market to price the implications of a current loss (profit) for a future loss (profit). In a 120-day window following the quarterly earnings announcement date, a portfolio of firms with extreme losses (profits) exhibits a -6.58 percent (3.55 percent) abnormal return. These patterns in stock returns translate into an annualized return of approximately 21 percent on a hedge portfolio that takes a long position in an extreme profit firm quintile and a short position in an extreme loss firm quintile. The results also demonstrate that this loss/profit anomaly is incremental to, and more pronounced than previously documented accounting-related anomalies. In an effort to explain this finding, we show that this mispricing is related to differences between conditional and unconditional probabilities of losses/profits, as if stock prices do not fully reflect conditional probabilities in a timely fashion. A battery of sensitivity tests shows that this loss/profit anomaly is robust to alternative risk adjustments, distress risk, short sales constraints, transaction costs, and sample periods.
Author: Kirsten L. Anderson
Publisher:
ISBN:
Category :
Languages : en
Pages : 47
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Book Description
This paper examines the relationship between divergent opinions and post-earnings announcement drift. We provide an improved measure of opinion divergence constructed from the dispersion of order flow across Nasdaq market makers that captures the breadth of divergence that is lost by volume-based measures. We find evidence that both limited participation (in the form of delayed price reaction and short sale constraints) and divergent opinions contribute significantly to drift. We also find that earnings surprises induce permanent upward shifts in opinion divergence, trading volume, and return volatility that last up to nine months following the announcement. Our results suggest that opinion divergence elicits added risk in the form of increased volatility with the resulting returns comprising a component of drift. We document that daily opinion divergence is a priced risk factor over the nine month drift period. The persistence of these relationships suggests that opinion divergence represents a fundamental change in the market's assessment of the announcing firm that extends beyond the announcement period and influences post-announcement stock returns.
