Bad volatility & Good volatility

Kitces said, investors will avoid what he describes as bad volatility and reap the benefits of good volatility

Những sự kiện chao đảo tài chính TG năm 2011

Những sự kiện chao đảo tài chính TG năm 2011

Decomposing Short-Term Return Reversal

Our decomposition suggests that short-term return reversal is pervasive, much greater than previously documented, and driven by investor sentiment on the short-side and liquidity shocks on the long-side.

Another decomposition paper by Da and Schaumburg's team

Testing Weak Form Efficiency on the Toronto Stock Exchange

We believe that in order to test for weak form efficiency in the market a vast pool of individual stocks must be analyzed rather than a stock market index.

In this paper, we use a model-based bootstrap to generate a series of simulated trials and apply a modified chart pattern recognition algorithm to all stocks listed on the Toronto Stock Exchange (TSX). --> The "recognize" chart patterns by computers, I don't like/believe in this.

We compare the number of patterns detected in the original price series with the number of patterns found in the simulated series. By simulating the price path we eliminate specific time dependencies present in real data, making price changes purely random. Patterns, if consistently identified, carry information which adds value to the investment process, however, this informativeness does not guarantee profitability.

Although, we fail to reject the null hypothesis of weak form efficiency on the TSX, some sectors of the Canadian economy appear to be less efficient than others. => So technical analysis may apply well for some sectors, and not for the others.

Two Paradigms and Nobel Prizes in Economics: a Contradiction or Coexistence?

Forthcoming European Financial Management

Haim Levy, Enrico G. De Giorgi, Thorsten Hens

Markowitz and Sharpe won the Nobel Prize in Economics for the development of Mean-Variance (M-V) analysis and the Capital Asset Pricing Model (CAPM). Kahneman won the Nobel Prize in Economics for the development of Prospect Theory. In deriving the CAPM, Sharpe, Lintner and Mossin assume expected utility (EU) maximisation in the face of risk aversion.

Kahneman and Tversky suggest Prospect Theory (PT) as an alternative paradigm to EU theory. They show that investors distort probabilities, make decisions based on change of wealth, exhibit loss aversion and maximise the expectation of an S-shaped value function, which contains a risk-seeking segment. Can these two apparently contradictory paradigms coexist? We show in this paper that although CPT (and PT) is in conflict to EUT, and violates some of the CAPM's underlying assumptions, the Security Market Line Theorem (SMLT) of the CAPM is intact in the CPT framework. Therefore, the CAPM is intact also in CPT framework.

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Quite interesting

Stock Volatility during the Recent Financial Crisis

Forthcoming - European Financial Management

Earnings management, IPO issuers and reputation

Do more reputable financial institutions reduce earnings management by IPO issuers? - Gemma Lee, Ronald W. Masulis

This study investigates whether financial intermediaries (FIs) participating in the IPO process play a significant role in restraining earnings management (EM). Specifically, we examine whether EM around IPOs is negatively related to investment banks (IBs) and venture capital (VC) investor reputations. In general, we do not find evidence that VCs as a group significantly restrain EM by IPO issuers.

However, we uncover strong evidence that more reputable VCs and IBs are associated with significantly less EM, which is consistent with them implicitly certifying the quality of issuer financial reports. Moreover, a stronger reduction in EM is found when more reputable IBs are matched with more reputable VCs, which indicates that VC and IB reputation are complements rather than substitutes. These conclusions are invariant to adjustments for potential endogeneity of underwriter reputation and VC-backing or reputation.

BDI - Stock returns

Hôm nay thấy đăng BDI rớt qua ngày thứ 11 liên tiếp, làm nhớ lại bài này: The Baltic Dry Index as a Predictor of Global Stock Returns, Commodity Returns, and Global Economic Activity

Behaviours: Game online

Những lý do khiến game online tồn tại

Are those beyond individual psychology aspects that behavioural finance traditionally look at?

Do I miss anything?

Why do Investors Pay Attention to Stock Spam?

Why do Investors Pay Attention to Stock Spam?

Đọc có rất nhiều thông tin về stock spams và Economics of Stock Spam. Nhưng tôi không nghĩ đây là 1 research area thật sự có nhiều ảnh hưởng.

Academic Finance as a Career - Don Chance

Academic Finance as a Career: The Good, The Bad, and the Not-So-Pretty

Đọc để biết cái vụ mà Cái tên đằng trước cái Chair của các Prof là fund bằng tiền ở đâu ra.

Forecasting Stock Market Returns - New UCLA paper

Forecasting Stock Market Returns: The Sum of the Parts is More than the Whole
Miguel A. Ferreira Universidade Nova de Lisboa
Pedro Santa-Clara University of California, Los Angeles

National Bureau of Economic Research (NBER) September 7, 2008

Abstract:

We propose forecasting separately the three components of stock market returns: dividend yield, earnings growth, and price-earnings ratio growth. We obtain out-of-sample R-squared coefficients (relative to the historical mean) of nearly 1.6% with monthly data and 16.9% with yearly data using the most common predictors suggested in the literature. This compares with typically negative R-squared coefficients obtained in a similar experiment by Goyal and Welch (2008). An investor who timed the market with our approach would have had a certainty equivalent gain of as much as 2.3% per year and a Sharpe ratio 82% higher than using the historical mean to forecast returns. We conclude that there is substantial predictability in equity returns and that it would have been possible to time the market in real time.

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1264670