HARVARD UNIVERSITY Department of Economics

Save this PDF as:
 WORD  PNG  TXT  JPG

Size: px
Start display at page:

Download "HARVARD UNIVERSITY Department of Economics"

Transcription

1 HARVARD UNIVERSITY Department of Economics Economics 970 Behavioral Finance Science Center 103b Spring 2002 M, W 7-8:30 pm Mr. Evgeny Agronin Teaching Fellow (617) Course Description One of the most intriguing questions that anyone has ever asked himself is whether it is possible to make money in the stock market. Some of those who tried indeed did, while many others found themselves very disappointed with their experience. How should an individual choose his portfolio of financial assets? What are the assets that generate the highest return? How can we explain that the returns on some assets are higher than on other assets? Are these differences in returns are due to risk or mispricing? We will first learn the classical approach to how assets are priced. This approach implies that differences in returns on different stocks exist due to different levels of risk associated with investment into these stocks. We will talk about the economic models of portfolio choice, implications of these models for the prices of assets, and the empirical evidence that addresses validity of these models. Differences in the performance of certain strategies have, however, difficulties to be explained by just different levels of risk associated with these strategies. Indeed, we will learn about the investment strategies that usually result in abnormally high return and are not very risky in the same time. This fact suggests that some assets are probably mispriced. Some assets are too expansive relative to the fundamental values of underlying companies. Other assets are too cheap. Why does mispricing exist in the stock market? Why do rational arbitrageurs, whose work is to make money on the mispricing of stocks, not eliminate it? The behavioral approach suggests that the participants in the stock market have certain psychological biases. They under- or overreact to news; they can be overconfident about their private information; they are averse not only to risk, which represents the uncertainty about an asset s going up or down, but also to losses; on the one hand, people put to much weight on the recent information in their decision; on the other hand they are too conservative. We will learn, how some of these biases can explain extremely good performance of certain strategies and extremely bad performance of other ones.

2 Course Requirements Class participation. 25% of grade. Attendance is mandatory. Class discussions are an essential component of the sophomore tutorial. Your full participation is expected in the discussion of assigned readings and general course themes. Response papers. 15% of grade divided among 5 papers (2-3 pp. each). These papers are intended to facilitate class participation. Topics will range from summarizing assigned readings to raising ideas for discussion. Essays. 15% of grade dividend among 3 papers (4-6 pp. each). Assigned topics will be based on class discussions and readings. Topics will include criticizing assigned readings an proposing solutions to economic problems. Empirical exercise. 15% of grade (5-7 pp.) You will construct an econometric model, report your findings, and analyze the results. Final paper. 30% of grade. (15-15 pp.) You will choose (or will be assigned) a pattern of behavior in the stock returns (among those which we will discuss in class) and write a final paper, which compares the classical explanations of this pattern vs. behavioral explanations. The comparison will be based on the literature discussed in class, and other related literature that you find yourself. You will try to find strong and weak sides of both approaches in the explanation of the pattern and conclude, which approach is more appropriate for the explanation. Course Policies Attendance. Attendance is mandatory at all regular class meetings. Exceptions for personal or family emergencies will be granted on a case-by-case basis. Tardiness. No assignment will be accepted beyond the announced deadline. As with attendance, exceptions for personal or family emergencies will be allowed on a case-bycase basis. Office hours. I will meet with students on the individual basis (we can set the time of the meeting either after the class, or via ).

3 Readings Part 1. Classical Approach to Asset Pricing Meeting Expected Utility and Risk Aversion 2. The Allias Paradox Varian, H.R., Intermediate microeconomics. A modern approach, Second Edition, W.W. Norton &Company, 1990; Ch. 11 (Asset Markets) and 12 (Uncertainty) Meeting Portfolio Choice Theory 2. CAPM Varian, H.R., Intermediate microeconomics. A modern approach, Second Edition, W.W. Norton &Company, 1990; Ch. 13 (Risky Assets) Sharpe, W., Capital asset prices: a theory of market equilibrium under conditions of risk, Journal of Finance 19, (JSTOR) Meeting Econometrics Overview 2. Empirical Tests of CAPM: cross-section and time-series approaches. Cochrane, J. H., Asset Pricing, Princeton University Press, 2001 Handouts Assignment 1. A response paper on what assumptions of CAPM are, and why it does not work (1 page). Meeting Consumption CAPM and EPP. The Notion of Risk. 2. SDF (by analogy with CAPM) and how we get to CAPM through SDF (CAPM as one factor model) 3. Does CAPM work? Fama, E. F. and K. R. French, 1992, The cross-section of expected stock returns, Journal of Finance 47, (JSTOR) Meeting 5. New and Old Facts in Finance Cochrane, J. H., 1997, Where is the market going? Uncertain facts and novel theories, Economic Perspectives 21 (6), Part 1 Cochrane, J. H., 1999, New facts in finance, Economic Perspectives 23 (3), Meeting Value Stocks vs. Growth Stocks

4 2. Explanations: Extrapolation vs. Risk in one factor model 3. Multifactor Models Lakonishok, J., A. Shleifer, and R. W., Vishny, 1994, Contrarian investment, extrapolation, and risk, Journal of Finance 49, (JSTOR) Fama, E. F., and K. R. French, 1996, Multifactor explanations of asset pricing anomalies, Journal of Finance 51, (JSTOR) Assignment 2. A short essay on the comparison of the competing behavioral and risk explanation (2-4 pages). Meeting Discussion of the essays 2. Guidelines for the empirical exercise 3. Discussion on various heuristics and biases Assignment 3. Empirical exercise on pricing assets with factors. Cross-section and timeseries approaches. Part 2. Investors Psychology and Asset Prices Meeting 8. Overview of Heuristics and Biases (continued) Hirshleifer, D., 2001, Investor psychology and asset pricing, forthcoming, Journal of Finance. Shiller, R. J., 2001, Bubbles, human judgment, and expert opinion, Cowles Foundation Discussion Paper No find a button click here to download the document Meeting 9. Prospect Theory and Applications Kahneman, D. and A. Tversky, 1979, Prospect theory: an analysis of decision under risk, Econometrica (JSTOR) Benartzi, S. and R. Thaler, 1997, Myopic loss aversion and the equity premium puzzle, Quarterly Journal of Economics Gneezy, U. and J. Ptters, 1997, An experiment in risk taking and evaluation periods, Quarterly Journal of Economics Meeting 10. Limited Diversification: people do not hold the market portfolio S. Benartzi, and R. Thaler, Naןve Diversification Strategies in defined contribution saving plans, American Economic Review 91:79-98, March S. Benartzi, Excessive extrapolation and the allocation of 401(k) accounts to company stock, Journal of Finance, October 2001.

5 Assignment 4. A response paper on how people diversify. Which psychological biases can be responsible for naive diversification? Meeting 11. Limited Participation Hong, H., Kubik, J.D., and J.C. Stein, 2001, Social interaction and stock-market participation, Mimeo. Part 3. Market Efficiency Meeting 12. Efficient Markets Hypothesis The Harvard College Economist, Spring 2001, An interview with Professor Andrey, Volume 1, Issue 1. University Press, Ch. 1 Assignment 5. A response paper on what is implied by the market efficiency, and whether markets are efficient. Meeting 13. Limited Arbitrage University Press, Ch. 2 & 3. Pontiff, J., 1996, Costly arbitrage: evidence from closed end funds, Quarterly Journal of Economics Meeting 14. Evidence of Limited Arbitrage Wurgler, J., and E. Zhuravaskya, 1999, Does arbitrage flatten demand curves for stocks, Harvard Mimeo. find a button click here to download the document Rashes, M., 1999, Massively confused investors making conspicuously ignorant choices (MCI-MCIC), Harvard Mimeo. Froot, K., and E. Dabora, 1999, How are stock prices affected by the location of trade, Journal of Financial Economics. Vol. 53 (2). P Meeting 15. Professional Arbitrage University Press, Ch. 4. Scholes, Myron S. Crisis and Risk Management, American Economic Review. Vol. 90 (2). p May 2000

6 Assignment 6. An essay on why arbitrage is possible. Can we make money on the stock market, without being exposed to risk? (2-4 pages) Part 4. Predictability of Returns Meeting 16. Predictability of Returns with Financial Ratios Goetzman, W.N., and P. Jorion, 1995, Testing the predictive power of dividend yields, Journal of Finance (JSTOR) Kothari, S.P., and J. Shanken, 1997, Book-to-market, dividend yield, and expected market returns: a time-series analysis, Journal of Financial Economics 44, Lamont, O., 1998, Earnings and expected returns, Journal of Finance 53, Assignment 7. A response paper on whether stock returns are predictable with the financial ratios. Meeting 17. Under- and Overreaction De Bond, Werner F. M., and R. Thaler, 1985, Does the stock market overreact?, Journal of Finance 40, (JSTOR) Jegadeesh, N., and S. Titman, 1993, Returns to buying winners and selling losers: Implications for stock market efficiency, Journal of Finance 48, (JSTOR) Chan, L., N. Jegadeesh and J. Lakonishok, 1996, Momentum Strategies, Journal of Finance, 1996 (JSTOR) Meeting 18. Post earnings announcement drift Bernanrd, V., 1993, Stock price reactions to earnings announcements: a summary of recent anomalous evidence and possible explanations, in Richard H. Thaler, ed., Advances in Behavioral Finance, Russell Sage Foundation Lee, C., and B. Swaminathan, 2000, Do stock prices overreact to earnings news?, Mimeo, Cornell University Assignment 8. An essay on how we can make money in the stock market (one should give a detailed description of the strategies; 2-4 pages). Meeting 19. Predictability and Investor Sentiment University Press, Ch. 4. La Porta, R., 1996, Expectations and the cross-section of stock returns, Journal of Finance (JSTOR) Meeting 20. Overconfidence

7 Odean, T., 1998, Volume, volatility, price and profit when all traders are above average, Journal of Finance 53, Barber, Brad M; Odean, Terrance. Trading Is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors, Journal of Finance Vol. 55 (2). p April Meeting 21. University Press, Ch. 6. Daniel, K. D., D. Hirshleifer, and A. Subrahmanyam, 1998, Investor psychology and security market under- and over-reactions, Journal of Finance 53, Hong, H., and J. Stein, A unified theory of underreaction, momentum trading, and overreaction in asset markets, Journal of Finance 54, Assignment 9. A response paper on how the anomalies like momentum and reversal are explained with behavioral biases. Part 5. Other Topics Meeting 22. Stock Price Movement without News and Market Crashes Romer, D., 1993, Rational asset-price movements without news, American Economic Review, 83, (JSTOR) Hong, H., and J. Stein, 1999, Differences of Opinion, rational arbitrage and market crashes, Mimeo. Chen, J., Hong, H., and J. Stein, 2000, Forecasting crashes: trading volume, past returns and conditional skewness in stock prices, Mimeo. Meeting Real Effects of Inefficient Markets 2. Conclusions Morck, R., Shleifer, A., and R. Vishny, 1990:2, The stock market and investment: is the market a sideshow?, Brookings Papers on Economic Activity (JSTOR) Baker, M. and J. Wurgler, 1999, The equity share in new issues and aggregate stock returns, Journal of Finance find a button click here to download the document University Press, Ch. 7.

8 Economics 970 Empirical Exercise Mr. Evgeny Agronin Spring 2002 In this exercise you will learn how to test CAPM using the famous Fama-MacBeth crosssectional approach that we studied in class. This approach is widely used by financial economists in testing not only CAPM, but also many other important classes of models, designed to price financial assets. You will use a data set crspdata.xls distributed in class. It contains 40 yearly observations on the portfolios of stocks formed by size (market capitalization) of the stocks. The portfolio in the first decile contains the biggest stocks, while the portfolio in the tenth decile contains the smallest stocks. The data set also contains 40 observations on the value-weighted return on the NYSE (New York Stock Exchange) index, which is often used as the market portfolio. If you know how to program in Matlab or Stata, I would recommend using this software, since you will save time if you use loops: you are expected to run 10 regressions in the first part of the exercise and 40 regressions in the second part. Both Stata and Matlab use the command regress to run regression. If you do not know how to program loops in any software familiar to you, running regressions in Excel or Stata (regression by regression) will not take much more time. Answer to each of the 10 questions (a e in the part 1, and a e in the part 2) gives you maximum 10% of the grade. 1. Take the time series of the biggest stocks (40 observations) and run this variable on the constant and the market returns (return on NYSE index). Then take the next size portfolio and perform the same procedure. Return to these steps until you run a regression for each portfolio. Store the coefficients that you get from the regressions. a. What is the β of each portfolio of stocks? b. Plot β as a function of size of the portfolios. What can you tell about the relation between β and size? Which portfolios of stocks, in your opinion, are riskier? c. What is the average return on each portfolio? Investment into which portfolios is more profitable on average? d. According to you answers to a, b and c, how is average return on a portfolio of stocks related to risk of the investment in this portfolio? e*. You probably know that in order to sell an asset you do not necessarily have to own this asset in the first place. Instead, you can borrow the asset and sell it. This is called short selling. Suppose, you do not have much money, and you also do not own any stock. Given your answers to a-d, which strategy would you take in order to make money? Try to describe your strategy in detail, what would you do in each step. Can you call such a strategy arbitrage?

9 2. For each year, you have a cross-section of 10 returns on the portfolios and 10 β-s corresponding to these portfolios. For each year, run a regression of returns on the constant and the β-s. Store the coefficients of β for each regression (thtotal of 40). Then calculate the mean of the coefficients and the variance of the mean. To calculate the variance use the following formula: σ = λ 2 40 t= 1 where λ t and λ are the coefficient from the regression run for the time t, and the mean of the coefficients over 40 years, respectively. 40 ( λ t λ) a. Notice, that the formula for the variance is not standard. Why should we divide by 40 2 and not 40, as usual? (Hint: use the logic of the central limit theorem) λ b. Calculate t-statistic of the regression: =. Is λ significantly different from zero? Does β affect return? c. Is the significance of λ enough to conclude that CAPM works? Discuss. d. Which steps would you add to the procedure above to test CAPM? Do not make the computation, just describe the intuition. e*. If you are asked to test CAPM using the only time series regressions (similar to what you have done in step 1), how would you proceed? Do not make the computation, just describe the intuition. t stat. 2 σ λ

Discussion of Momentum and Autocorrelation in Stock Returns

Discussion of Momentum and Autocorrelation in Stock Returns Discussion of Momentum and Autocorrelation in Stock Returns Joseph Chen University of Southern California Harrison Hong Stanford University Jegadeesh and Titman (1993) document individual stock momentum:

More information

Market Efficiency and Behavioral Finance. Chapter 12

Market Efficiency and Behavioral Finance. Chapter 12 Market Efficiency and Behavioral Finance Chapter 12 Market Efficiency if stock prices reflect firm performance, should we be able to predict them? if prices were to be predictable, that would create the

More information

AN OVERVIEW OF INVESTOR SENTIMENT IN STOCK MARKET

AN OVERVIEW OF INVESTOR SENTIMENT IN STOCK MARKET AN OVERVIEW OF INVESTOR SENTIMENT IN STOCK MARKET Amy (Chun-Chia) Chang San Francisco State University Shaokun (Carol) Yu Northern Illinois University Alan Reinstein Wayne State University Natalie Tatiana

More information

Absolute Strength: Exploring Momentum in Stock Returns

Absolute Strength: Exploring Momentum in Stock Returns Absolute Strength: Exploring Momentum in Stock Returns Huseyin Gulen Krannert School of Management Purdue University Ralitsa Petkova Weatherhead School of Management Case Western Reserve University March

More information

The End of Behavioral Finance

The End of Behavioral Finance PERSPECTIVES The End of Behavioral Finance Richard H. Thaler I n 1985, Werner De Bondt and I published an article that asked the question: Does the stock market overreact? The article was controversial

More information

INVESTMENTS Classes 8 & 9: The Equity Market Cross Sectional Variation in Stock Returns. Spring 2003

INVESTMENTS Classes 8 & 9: The Equity Market Cross Sectional Variation in Stock Returns. Spring 2003 15.433 INVESTMENTS Classes 8 & 9: The Equity Market Cross Sectional Variation in Stock Returns Spring 2003 Introduction Equities are common stocks, representing ownership shares of a corporation. Two important

More information

CHAPTER 11: THE EFFICIENT MARKET HYPOTHESIS

CHAPTER 11: THE EFFICIENT MARKET HYPOTHESIS CHAPTER 11: THE EFFICIENT MARKET HYPOTHESIS PROBLEM SETS 1. The correlation coefficient between stock returns for two non-overlapping periods should be zero. If not, one could use returns from one period

More information

Stock Returns Following Profit Warnings: A Test of Models of Behavioural Finance.

Stock Returns Following Profit Warnings: A Test of Models of Behavioural Finance. Stock Returns Following Profit Warnings: A Test of Models of Behavioural Finance. G. Bulkley, R.D.F. Harris, R. Herrerias Department of Economics, University of Exeter * Abstract Models in behavioural

More information

1. INTRODUCTION * 2.1. Decision makers biases

1. INTRODUCTION * 2.1. Decision makers biases Mean E Cubbin, reversion M on Eidne, the JSE C Firer and E Gilbert* Mean reversion on the JSE 1. INTRODUCTION * One of the cornerstones of modern financial markets is the proposition that markets are efficient.

More information

Trading Strategies and Financial Models. Alexander Barinov

Trading Strategies and Financial Models. Alexander Barinov Trading Strategies and Financial Models Alexander Barinov This version: July 2014 c 2014 Alexander Barinov Contents 1 Topics in Market Efficiency 17 1.1 EMH and Expected Returns.......................

More information

EVIDENCE IN FAVOR OF MARKET EFFICIENCY

EVIDENCE IN FAVOR OF MARKET EFFICIENCY Appendix to Chapter 7 Evidence on the Efficient Market Hypothesis Early evidence on the efficient market hypothesis was quite favorable to it. In recent years, however, deeper analysis of the evidence

More information

Review for Exam 2. Instructions: Please read carefully

Review for Exam 2. Instructions: Please read carefully Review for Exam Instructions: Please read carefully The exam will have 1 multiple choice questions and 5 work problems. Questions in the multiple choice section will be either concept or calculation questions.

More information

Review for Exam 2. Instructions: Please read carefully

Review for Exam 2. Instructions: Please read carefully Review for Exam 2 Instructions: Please read carefully The exam will have 25 multiple choice questions and 5 work problems You are not responsible for any topics that are not covered in the lecture note

More information

CHAPTER 11: THE EFFICIENT MARKET HYPOTHESIS

CHAPTER 11: THE EFFICIENT MARKET HYPOTHESIS CHAPTER 11: THE EFFICIENT MARKET HYPOTHESIS PROBLEM SETS 1. The correlation coefficient between stock returns for two non-overlapping periods should be zero. If not, one could use returns from one period

More information

Chap 3 CAPM, Arbitrage, and Linear Factor Models

Chap 3 CAPM, Arbitrage, and Linear Factor Models Chap 3 CAPM, Arbitrage, and Linear Factor Models 1 Asset Pricing Model a logical extension of portfolio selection theory is to consider the equilibrium asset pricing consequences of investors individually

More information

Answering Financial Anomalies: Sentiment-Based Stock Pricing

Answering Financial Anomalies: Sentiment-Based Stock Pricing The Journal of Behavioral Finance Copyright C 2007 by 2007, Vol. 8, No. 3, 161 171 The Institute of Behavioral Finance Answering Financial Anomalies: Sentiment-Based Stock Pricing Edward R. Lawrence, George

More information

Investor Sentiment in the Stock Market

Investor Sentiment in the Stock Market Purdue University Purdue e-pubs Open Access Theses Theses and Dissertations 2013 Investor Sentiment in the Stock Market Bayram Veli Salur Purdue University, bayram.salur@gmail.com Follow this and additional

More information

Ankur Pareek Rutgers School of Business

Ankur Pareek Rutgers School of Business Yale ICF Working Paper No. 09-19 First version: August 2009 Institutional Investors Investment Durations and Stock Return Anomalies: Momentum, Reversal, Accruals, Share Issuance and R&D Increases Martijn

More information

FADE THE GAP: ODDS FAVOR MEAN REVERSION

FADE THE GAP: ODDS FAVOR MEAN REVERSION FADE THE GAP: ODDS FAVOR MEAN REVERSION First Draft: July 2014 This Draft: July 2014 Jia-Yuh Chen and Timothy L. Palmer Abstract When a stock opens a day s trading at a lower price than its previous day

More information

A Behavioural Explanation Of Six Finance. puzzle. Solution

A Behavioural Explanation Of Six Finance. puzzle. Solution A Behavioural Explanation Of Six Finance Puzzles Solution Developed from Investor Psychology: A Behavioural Explanation Of Six Finance Puzzles, Henriëtte Prast, Research Series - De Nederlandsche Bank,

More information

The Stock Market Valuation of Research and Development Expenditures

The Stock Market Valuation of Research and Development Expenditures Discussion of: The Stock Market Valuation of Research and Development Expenditures by Louis K.C. Chan, Josef Lakonishok and Theodore Sougiannis American Finance Association Meetings January 7, 2000 Discussant:

More information

The weekend effect. How does it influence stock returns ANR: 967509

The weekend effect. How does it influence stock returns ANR: 967509 The weekend effect How does it influence stock returns Author: Peter Coenen ANR: 967509 Supervisor: B. Düzce Introduction In 1929 there was a stock market crash on Wall Street. It started on Thursday 24

More information

Market sentiment and mutual fund trading strategies

Market sentiment and mutual fund trading strategies Nelson Lacey (USA), Qiang Bu (USA) Market sentiment and mutual fund trading strategies Abstract Based on a sample of the US equity, this paper investigates the performance of both follow-the-leader (momentum)

More information

Market Efficiency: Definitions and Tests. Aswath Damodaran

Market Efficiency: Definitions and Tests. Aswath Damodaran Market Efficiency: Definitions and Tests 1 Why market efficiency matters.. Question of whether markets are efficient, and if not, where the inefficiencies lie, is central to investment valuation. If markets

More information

Momentum and Autocorrelation in Stock Returns

Momentum and Autocorrelation in Stock Returns Momentum and Autocorrelation in Stock Returns Jonathan Lewellen MIT Sloan School of Management This article studies momentum in stock returns, focusing on the role of industry, size, and book-to-market

More information

Financial University under the Government of Russian Federation

Financial University under the Government of Russian Federation Financial University under the Government of Russian Federation Course: Behavioral Finance and business valuation. Spring, 2017 Professor Marina A. Fedotova Associate professor Semen Y. Bogatyrev E-mail:

More information

ECON4510 Finance Theory Lecture 7

ECON4510 Finance Theory Lecture 7 ECON4510 Finance Theory Lecture 7 Diderik Lund Department of Economics University of Oslo 11 March 2015 Diderik Lund, Dept. of Economics, UiO ECON4510 Lecture 7 11 March 2015 1 / 24 Market efficiency Market

More information

Contrarian Investing Strategies in the Indian Stock Market

Contrarian Investing Strategies in the Indian Stock Market Master Thesis Aarhus School of Business and Social Sciences, Aarhus University Msc in Finance, Department of Business Studies July 2011 Contrarian Investing Strategies in the Indian Stock Market Dziugas

More information

2. Capital Asset pricing Model

2. Capital Asset pricing Model 2. Capital Asset pricing Model Dr. Youchang Wu WS 2007 Asset Management Youchang Wu 1 Efficient frontier in the presence of a risk-free asset Asset Management Youchang Wu 2 Capital market line When a risk-free

More information

SONDERFORSCHUNGSBEREICH 504

SONDERFORSCHUNGSBEREICH 504 SONDERFORSCHUNGSBEREICH 504 Rationalitätskonzepte, Entscheidungsverhalten und ökonomische Modellierung No. 07-42 How do Markets React to Fundamental Shocks? An Experimental Analysis on Underreaction and

More information

FINANCIAL MARKETS GROUP AN ESRC RESEARCH CENTRE

FINANCIAL MARKETS GROUP AN ESRC RESEARCH CENTRE Momentum in the UK Stock Market By Mark T Hon and Ian Tonks DISCUSSION PAPER 405 February 2002 FINANCIAL MARKETS GROUP AN ESRC RESEARCH CENTRE LONDON SCHOOL OF ECONOMICS Any opinions expressed are those

More information

Exploiting Market Anomalies to Enhance Investment Returns. CFA UK Society Masterclass

Exploiting Market Anomalies to Enhance Investment Returns. CFA UK Society Masterclass Exploiting Market Anomalies to Enhance Investment Returns CFA UK Society Masterclass Richard J Taffler Professor of Finance and Accounting (Richard.Taffler@wbs.ac.uk) Nomura, One Angel Lane, London, EC4

More information

Shahid Iqbal, Nazik Hussain, Madiha Latif and Sumaira Aslam. Department of Management Sciences, The Islamia University of Bahawalpur, Pakistan

Shahid Iqbal, Nazik Hussain, Madiha Latif and Sumaira Aslam. Department of Management Sciences, The Islamia University of Bahawalpur, Pakistan Middle-East Journal of Scientific Research 17 (11): 1591-1596, 2013 ISSN 1990-9233 IDOSI Publications, 2013 DOI: 10.5829/idosi.mejsr.2013.17.11.11787 Investor Type and Financial Market Anomalies: A Comparison

More information

Are High-Quality Firms Also High-Quality Investments?

Are High-Quality Firms Also High-Quality Investments? FEDERAL RESERVE BANK OF NEW YORK IN ECONOMICS AND FINANCE January 2000 Volume 6 Number 1 Are High-Quality Firms Also High-Quality Investments? Peter Antunovich, David Laster, and Scott Mitnick The relationship

More information

Momentum in the UK Stock Market

Momentum in the UK Stock Market Momentum in the UK Stock Market by Mark Hon and Ian Tonks January 2001 Discussion Paper No. 01/516 Department of Economics, University of Bristol, 8, Woodland Road, Bristol BS8 1TN. Contact author Mark

More information

The High-Volume Return Premium: Evidence from Chinese Stock Markets

The High-Volume Return Premium: Evidence from Chinese Stock Markets The High-Volume Return Premium: Evidence from Chinese Stock Markets 1. Introduction If price and quantity are two fundamental elements in any market interaction, then the importance of trading volume in

More information

Profitability of Momentum Strategies: An Evaluation of Alternative Explanations

Profitability of Momentum Strategies: An Evaluation of Alternative Explanations TIIE JOURNAI. OF FINANCE * VOI, IA1, NO 2 * 4PRII) 2001 Profitability of Momentum Strategies: An Evaluation of Alternative Explanations NARASIMHAN JEGADEESH and SHERIDAN TITMAN* This paper evaluates various

More information

ANOMALIES AND MARKET EFFICIENCY

ANOMALIES AND MARKET EFFICIENCY Chapter 15 ANOMALIES AND MARKET EFFICIENCY G. WILLIAM SCHWERT University of Rochester, and NBER Contents Abstract 939 Keywords 939 1. Introduction 940 2. Selected empirical regularities 941 2.1. Predictable

More information

QUANTITATIVE FINANCIAL ECONOMICS

QUANTITATIVE FINANCIAL ECONOMICS Ill. i,t.,. QUANTITATIVE FINANCIAL ECONOMICS STOCKS, BONDS AND FOREIGN EXCHANGE Second Edition KEITH CUTHBERTSON AND DIRK NITZSCHE HOCHSCHULE John Wiley 8k Sons, Ltd CONTENTS Preface Acknowledgements 2.1

More information

Behavioral Finance and the Sources of Alpha. Russell J. Fuller, CFA

Behavioral Finance and the Sources of Alpha. Russell J. Fuller, CFA Behavioral Finance and the Sources of Alpha Russell J. Fuller, CFA President RJF Asset Management 1300 El Camino Real, Suite 504 San Mateo, CA 94402 (650) 572-8334 February 6, 2000 Forthcoming, Journal

More information

The Case For Passive Investing!

The Case For Passive Investing! The Case For Passive Investing! Aswath Damodaran Aswath Damodaran! 1! The Mechanics of Indexing! Fully indexed fund: An index fund attempts to replicate a market index. It is relatively simple to create,

More information

Excess Implied Return (EIR) 1. Dan Gode and James Ohlson

Excess Implied Return (EIR) 1. Dan Gode and James Ohlson Excess Implied Return (EIR) 1 1. Overview EXCESS IMPLIED RETURN (EIR) Dan Gode and James Ohlson Investors often start their analysis using screens that provide preliminary indicators of mispriced stocks.

More information

DECISIONS IN FINANCIAL ECONOMICS: AN EXPERIMENTAL STUDY OF DISCOUNT RATES. Uri Benzion* and Joseph Yagil** ABSTRACT

DECISIONS IN FINANCIAL ECONOMICS: AN EXPERIMENTAL STUDY OF DISCOUNT RATES. Uri Benzion* and Joseph Yagil** ABSTRACT DECISIONS IN FINANCIAL ECONOMICS: AN EXPERIMENTAL STUDY OF DISCOUNT RATES Uri Benzion* and Joseph Yagil** ABSTRACT Using three subsamples of subjects that differ in their level of formal education and

More information

MODERN PORTFOLIO THEORY AND INVESTMENT ANALYSIS

MODERN PORTFOLIO THEORY AND INVESTMENT ANALYSIS MODERN PORTFOLIO THEORY AND INVESTMENT ANALYSIS EIGHTH EDITION INTERNATIONAL STUDENT VERSION EDWIN J. ELTON Leonard N. Stern School of Business New York University MARTIN J. GRUBER Leonard N. Stern School

More information

THE ANALYSIS OF PREDICTABILITY OF SHARE PRICE CHANGES USING THE MOMENTUM MODEL

THE ANALYSIS OF PREDICTABILITY OF SHARE PRICE CHANGES USING THE MOMENTUM MODEL THE ANALYSIS OF PREDICTABILITY OF SHARE PRICE CHANGES USING THE MOMENTUM MODEL Tatjana Stanivuk University of Split, Faculty of Maritime Studies Zrinsko-Frankopanska 38, 21000 Split, Croatia E-mail: tstanivu@pfst.hr

More information

SUMMARY. a) Theoretical prerequisites of Capital Market Theory b) Irrational behavior of investors. d) Some empirical evidence in recent years

SUMMARY. a) Theoretical prerequisites of Capital Market Theory b) Irrational behavior of investors. d) Some empirical evidence in recent years 1 SUMMARY a) Theoretical prerequisites of Capital Market Theory b) Irrational behavior of investors c) The influence on risk profile d) Some empirical evidence in recent years e) Behavioral finance and

More information

Adaptive Market Efficiency: Review of Recent Empirical Evidence on the Persistence of Stock Market Anomalies

Adaptive Market Efficiency: Review of Recent Empirical Evidence on the Persistence of Stock Market Anomalies Rev. Integr. Bus. Econ. Res. Vol 3(2) 268 Adaptive Market Efficiency: Review of Recent Empirical Evidence on the Persistence of Stock Market Anomalies Christoph Meier College of Management Mahidol University

More information

Models of Risk and Return

Models of Risk and Return Models of Risk and Return Aswath Damodaran Aswath Damodaran 1 First Principles Invest in projects that yield a return greater than the minimum acceptable hurdle rate. The hurdle rate should be higher for

More information

Futures Price d,f $ 0.65 = (1.05) (1.04)

Futures Price d,f $ 0.65 = (1.05) (1.04) 24 e. Currency Futures In a currency futures contract, you enter into a contract to buy a foreign currency at a price fixed today. To see how spot and futures currency prices are related, note that holding

More information

Overreaction and Underreaction : - Evidence for the Portuguese Stock Market -

Overreaction and Underreaction : - Evidence for the Portuguese Stock Market - Overreaction and Underreaction : - Evidence for the Portuguese Stock Market - João Vasco Soares* and Ana Paula Serra** March 2005 * Faculdade de Economia da Universidade do Porto ** (corresponding author)

More information

The Momentum Effect: Evidence from the Swedish stock market

The Momentum Effect: Evidence from the Swedish stock market DEPARTMENT OF ECONOMICS Uppsala University Master s Thesis Author: Marcus Vilbern Tutor: Bengt Assarsson Spring 2008 The Momentum Effect: Evidence from the Swedish stock market Abstract This thesis investigates

More information

Value investing using price earnings ratio in New Zealand

Value investing using price earnings ratio in New Zealand Volume 11 No. 1 Value investing using price earnings ratio in New Zealand - Cameron Truong (c) Copyright 2009, The University of Auckland. Permission to make digital or hard copies of all or part of this

More information

SAMPLE MID-TERM QUESTIONS

SAMPLE MID-TERM QUESTIONS SAMPLE MID-TERM QUESTIONS William L. Silber HOW TO PREPARE FOR THE MID- TERM: 1. Study in a group 2. Review the concept questions in the Before and After book 3. When you review the questions listed below,

More information

Informational Content of Open-to-Close Stock Returns

Informational Content of Open-to-Close Stock Returns Informational Content of Open-to-Close Stock Returns Andrey Kudryavtsev * Abstract: In the present study, I explore interday correlations between open-to-close and opening stock returns. Employing intraday

More information

Predictability of Future Index Returns based on the 52 Week High Strategy

Predictability of Future Index Returns based on the 52 Week High Strategy ISSN 1836-8123 Predictability of Future Index Returns based on the 52 Week High Strategy Mirela Malin and Graham Bornholt No. 2009-07 Series Editor: Dr. Alexandr Akimov Copyright 2009 by author(s). No

More information

Market efficiency, long-term returns, and behavioral finance

Market efficiency, long-term returns, and behavioral finance Journal of Financial Economics 49 (1998) 283 306 Market efficiency, long-term returns, and behavioral finance Eugene F. Fama* Graduate School of Business, University of Chicago, Chicago, IL 60637, USA

More information

Master thesis. Value and growth stocks on the Swedish stock market

Master thesis. Value and growth stocks on the Swedish stock market Master thesis MSc Applied Economics and Finance August 2011 Value and growth stocks on the Swedish stock market Author: Mikael Stråhle Supervisor: Lars Kolte 77 pages excluding front page and appendices

More information

ECON 351: The Stock Market, the Theory of Rational Expectations, and the Efficient Market Hypothesis

ECON 351: The Stock Market, the Theory of Rational Expectations, and the Efficient Market Hypothesis ECON 351: The Stock Market, the Theory of Rational Expectations, and the Efficient Market Hypothesis Alejandro Riaño Penn State University June 8, 2008 Alejandro Riaño (Penn State University) ECON 351:

More information

Commonality In The Determinants Of Expected Stock Returns * Journal of Financial Economics, Summer 1996

Commonality In The Determinants Of Expected Stock Returns * Journal of Financial Economics, Summer 1996 Commonality In The Determinants Of Expected Stock Returns * by Robert A. Haugen ** and Nardin L. Baker *** Journal of Financial Economics, Summer 1996 ** Professor of Finance, University of California,

More information

A Two-Factor Asset Pricing Model and the Fat Tail Distribution of Firm Sizes

A Two-Factor Asset Pricing Model and the Fat Tail Distribution of Firm Sizes A Two-Factor Asset Pricing Model and the Fat Tail Distribution of Firm Sizes Y. Malevergne 1,2 & D. Sornette 1 1 ETH Zurich, Chair of Entrepreneurial Risks Switzerland 2 EM-Lyon Business School France

More information

The Tangent or Efficient Portfolio

The Tangent or Efficient Portfolio The Tangent or Efficient Portfolio 1 2 Identifying the Tangent Portfolio Sharpe Ratio: Measures the ratio of reward-to-volatility provided by a portfolio Sharpe Ratio Portfolio Excess Return E[ RP ] r

More information

Broker-Dealer Leverage and the Cross-Section of Stock Returns 1

Broker-Dealer Leverage and the Cross-Section of Stock Returns 1 Broker-Dealer Leverage and the Cross-Section of Stock Returns 1 Tobias Adrian, Erkko Etula and Tyler Muir Federal Reserve Bank of New York and Northwestern University Bank of England, January -5, 11 1

More information

ECON 422A: FINANCE AND INVESTMENTS

ECON 422A: FINANCE AND INVESTMENTS ECON 422A: FINANCE AND INVESTMENTS LECTURE 10: EXPECTATIONS AND THE INFORMATIONAL CONTENT OF SECURITY PRICES Mu-Jeung Yang Winter 2016 c 2016 Mu-Jeung Yang OUTLINE FOR TODAY I) Informational Efficiency:

More information

Behavioral Finance. to appear in: Derek J. Koehler and Nigel Harvey (eds.), Blackwell Handbook of Judgment and Decision Making Chapter 26

Behavioral Finance. to appear in: Derek J. Koehler and Nigel Harvey (eds.), Blackwell Handbook of Judgment and Decision Making Chapter 26 Behavioral Finance Markus Glaser, a Markus Nöth, a Martin Weber a,b to appear in: Derek J. Koehler and Nigel Harvey (eds.), Blackwell Handbook of Judgment and Decision Making Chapter 26 Lehrstuhl für Bankbetriebslehre

More information

Buy, Sell, or Hold? An Event Study Analysis of Significant Single Day Losses in Equity Value

Buy, Sell, or Hold? An Event Study Analysis of Significant Single Day Losses in Equity Value Buy, Sell, or Hold? An Event Study Analysis of Significant Single Day Losses in Equity Value Prepared for: Ramu Thiagarajan Mellon Capital Management and Professor Bob McDonald Finance 925 Kellogg Graduate

More information

The efficient market hypothesis and the design of investment activity

The efficient market hypothesis and the design of investment activity The efficient market hypothesis and the design of investment activity 1 How should one design an investment strategy? One option: active trading based on Information ( news ) Market trends ( momentum )

More information

Limits to Arbitrage: An introduction to Behavioral Finance and a Literature Review

Limits to Arbitrage: An introduction to Behavioral Finance and a Literature Review Limits to Arbitrage: An introduction to Behavioral Finance and a Literature Review Miguel Herschberg Abstract This paper is a survey of the developments in the literature of the Limits to Arbitrage. We

More information

Allaudeen Hameed and Yuanto Kusnadi

Allaudeen Hameed and Yuanto Kusnadi The Journal of Financial Research Vol. XXV, No. 3 Pages 383 397 Fall 2002 MOMENTUM STRATEGIES: EVIDENCE FROM PACIFIC BASIN STOCK MARKETS Allaudeen Hameed and Yuanto Kusnadi National University of Singapore

More information

MSc Finance and Economics detailed module information

MSc Finance and Economics detailed module information MSc Finance and Economics detailed module information Example timetable Please note that information regarding modules is subject to change. TERM 1 TERM 2 TERM 3 INDUCTION WEEK EXAM PERIOD Week 1 EXAM

More information

Price Momentum and Trading Volume

Price Momentum and Trading Volume THE JOURNAL OF FINANCE VOL. LV, NO. 5 OCT. 2000 Price Momentum and Trading Volume CHARLES M. C. LEE and BHASKARAN SWAMINATHAN* ABSTRACT This study shows that past trading volume provides an important link

More information

Stock Prices and Business Investment

Stock Prices and Business Investment Stock Prices and Business Investment BY YARON LEITNER I s there a link between the stock market and business investment? Empirical evidence indicates that there is. A firm tends to invest more when its

More information

is dead in the context of empirical models of assets returns. Rhys Frake Word count: 2997

is dead in the context of empirical models of assets returns. Rhys Frake Word count: 2997 Present a critique of the Capital Asset Pricing Model, and hence discuss the claim that beta is dead in the context of empirical models of assets returns. Rhys Frake 0937708 Word count: 2997 1 P a g e

More information

CAN INVESTORS PROFIT FROM THE PROPHETS? CONSENSUS ANALYST RECOMMENDATIONS AND STOCK RETURNS

CAN INVESTORS PROFIT FROM THE PROPHETS? CONSENSUS ANALYST RECOMMENDATIONS AND STOCK RETURNS CAN INVESTORS PROFIT FROM THE PROPHETS? CONSENSUS ANALYST RECOMMENDATIONS AND STOCK RETURNS Brad Barber Graduate School of Management University of California, Davis Reuven Lehavy Haas School of Business

More information

Permanent Link: http://espace.library.curtin.edu.au/r?func=dbin-jump-full&local_base=gen01-era02&object_id=127954

Permanent Link: http://espace.library.curtin.edu.au/r?func=dbin-jump-full&local_base=gen01-era02&object_id=127954 Citation: Calder, Dan and O'Grady, Thomas (Barry). 2009. Commodity futures and momentum trading: implications for behavioural finance, School of Economics and Finance Working Paper Series: no.09.01, Curtin

More information

KENNETH R. FRENCH. Roth Family Distinguished Professor of Finance 85 Trescott Road Tuck School of Business at Dartmouth

KENNETH R. FRENCH. Roth Family Distinguished Professor of Finance 85 Trescott Road Tuck School of Business at Dartmouth KENNETH R. FRENCH August 2015 Preferred Address: Roth Family Distinguished Professor of Finance 85 Trescott Road Tuck School of Business at Dartmouth Etna, NH 03750 100 Tuck Hall Hanover, NH 03755-9000

More information

DO INDIVIDUAL INVESTORS CAUSE POST-EARNINGS ANNOUNCEMENT DRIFT? DIRECT EVIDENCE FROM PERSONAL TRADES

DO INDIVIDUAL INVESTORS CAUSE POST-EARNINGS ANNOUNCEMENT DRIFT? DIRECT EVIDENCE FROM PERSONAL TRADES DO INDIVIDUAL INVESTORS CAUSE POST-EARNINGS ANNOUNCEMENT DRIFT? DIRECT EVIDENCE FROM PERSONAL TRADES David Hirshleifer* James N. Myers** Linda A. Myers** Siew Hong Teoh* * The Paul Merage School of Business,

More information

Magic Formula investing in the Benelux. Bachelor thesis BE

Magic Formula investing in the Benelux. Bachelor thesis BE Magic Formula investing in the Benelux Bachelor thesis BE ABSTRACT Joel Greenblatt s Magic Formula trading strategy was able to generate market beating returns without taking additional risk in the United

More information

Asset Pricing Models and Industry Sorted Portfolios

Asset Pricing Models and Industry Sorted Portfolios Asset Pricing Models and Industry Sorted Portfolios Author: Marijn de Vries ANR: 264141 Faculty: Faculty of Economics and Business studies Programme: Bedrijfseconomie Supervisor: Jiehui Hu MSc Date: 7/6/2012

More information

Lecture 8: Stock market reaction to accounting data

Lecture 8: Stock market reaction to accounting data Lecture 8: Stock market reaction to accounting data In this lecture we will focus on how the market appears to evaluate accounting disclosures. For most of the time, we shall be examining the results of

More information

A Panel Data Analysis of Corporate Attributes and Stock Prices for Indian Manufacturing Sector

A Panel Data Analysis of Corporate Attributes and Stock Prices for Indian Manufacturing Sector Journal of Modern Accounting and Auditing, ISSN 1548-6583 November 2013, Vol. 9, No. 11, 1519-1525 D DAVID PUBLISHING A Panel Data Analysis of Corporate Attributes and Stock Prices for Indian Manufacturing

More information

Analyst Performance and Post-Analyst Revision Drift

Analyst Performance and Post-Analyst Revision Drift Analyst Performance and Post-Analyst Revision Drift Chattrin Laksanabunsong University of Chicago This is very preliminary. Abstract This paper tests whether changes in analyst performance can lead to

More information

ANALYSIS AND MANAGEMENT

ANALYSIS AND MANAGEMENT ANALYSIS AND MANAGEMENT T H 1RD CANADIAN EDITION W. SEAN CLEARY Queen's University CHARLES P. JONES North Carolina State University JOHN WILEY & SONS CANADA, LTD. CONTENTS PART ONE Background CHAPTER 1

More information

Investment and Trading Pattern of Individuals Dealing in Stock Market

Investment and Trading Pattern of Individuals Dealing in Stock Market Investment and Trading Pattern of Individuals Dealing in Stock Market Dr. Kaushal A. Bhatt* *Assistant Professor, Center / Schools for Global Business Study, Gujarat Technological University, Chandkheda,

More information

Creating and Monitoring A Diversified Stock Portfolio

Creating and Monitoring A Diversified Stock Portfolio Creating and Monitoring A Diversified Stock Portfolio Acknowledgement This publication was made possible by a grant from the FINRA Investor Education Foundation. The FINRA Investor Education Foundation

More information

The performance of the S&P Global Luxury Index compared to the MSCI World Index, during the financial crisis.

The performance of the S&P Global Luxury Index compared to the MSCI World Index, during the financial crisis. The performance of the S&P Global Luxury Index compared to the MSCI World Index, during the financial crisis. An analysis of 80 luxury goods companies around the world Name: Laura van Ballegooijen Student

More information

The overconfidence hypothesis suggests that

The overconfidence hypothesis suggests that Overconfidence Bias in International Stock Prices Consistent across countries and trading environments. James Scott, Margaret Stumpp, and Peter Xu JAMES SCOTT is a senior managing director at Prudential

More information

We correlate analysts forecast errors with temporal variation in investor sentiment. We find that when

We correlate analysts forecast errors with temporal variation in investor sentiment. We find that when MANAGEMENT SCIENCE Vol. 58, No. 2, February 2012, pp. 293 307 ISSN 0025-1909 (print) ISSN 1526-5501 (online) http://dx.doi.org/10.1287/mnsc.1110.1356 2012 INFORMS Investor Sentiment and Analysts Earnings

More information

Jonathan A. Milian. Florida International University School of Accounting 11200 S.W. 8 th St. Miami, FL 33199. jonathan.milian@fiu.

Jonathan A. Milian. Florida International University School of Accounting 11200 S.W. 8 th St. Miami, FL 33199. jonathan.milian@fiu. Online Appendix Unsophisticated Arbitrageurs and Market Efficiency: Overreacting to a History of Underreaction? Jonathan A. Milian Florida International University School of Accounting 11200 S.W. 8 th

More information

FOREIGN SMALL CAP EQUITIES

FOREIGN SMALL CAP EQUITIES MEKETA INVESTMENT GROUP FOREIGN SMALL CAP EQUITIES ABSTRACT International equity investing is widely accepted by institutional investors as a way to diversify their portfolios. In addition, expanding the

More information

Does Shareholder Composition Affect Stock Returns? Evidence from Corporate Earnings Announcements

Does Shareholder Composition Affect Stock Returns? Evidence from Corporate Earnings Announcements Discussion of: Does Shareholder Composition Affect Stock Returns? Evidence from Corporate Earnings Announcements by Edith S. Hotchkiss and Deon Strickland NBER Corporate Finance Meetings August 8, 2000

More information

The Master of Science in Finance (English Program) - MSF. Department of Banking and Finance. Chulalongkorn Business School. Chulalongkorn University

The Master of Science in Finance (English Program) - MSF. Department of Banking and Finance. Chulalongkorn Business School. Chulalongkorn University The Master of Science in Finance (English Program) - MSF Department of Banking and Finance Chulalongkorn Business School Chulalongkorn University Overview of Program Structure Full Time Program: 1 Year

More information

Trading Is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors

Trading Is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors Trading Is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors BRAD M. BARBER TERRANCE ODEAN Presenter: Hsuan-Chi Chen ABSTRACT Individual investors who hold common

More information

I.e., the return per dollar from investing in the shares from time 0 to time 1,

I.e., the return per dollar from investing in the shares from time 0 to time 1, XVII. SECURITY PRICING AND SECURITY ANALYSIS IN AN EFFICIENT MARKET Consider the following somewhat simplified description of a typical analyst-investor's actions in making an investment decision. First,

More information

Key Concepts and Skills

Key Concepts and Skills Chapter 10 Some Lessons from Capital Market History Key Concepts and Skills Know how to calculate the return on an investment Understand the historical returns on various types of investments Understand

More information

The Equity Premium in India

The Equity Premium in India The Equity Premium in India Rajnish Mehra University of California, Santa Barbara and National Bureau of Economic Research January 06 Prepared for the Oxford Companion to Economics in India edited by Kaushik

More information

Market Efficiency, Long-Term Returns, and Behavioral Finance. Eugene F. Fama * Abstract

Market Efficiency, Long-Term Returns, and Behavioral Finance. Eugene F. Fama * Abstract First Draft: February 1997 This draft: June 1997 Not for Quotation: Comments Welcome Market Efficiency, Long-Term Returns, and Behavioral Finance Eugene F. Fama * Abstract Market efficiency survives the

More information

The use of CAPM and Fama and French Three Factor Model: portfolios selection

The use of CAPM and Fama and French Three Factor Model: portfolios selection Belen Blanco (Spain) The use of CAPM and Fama and French Three Factor Model: portfolios selection Abstract This work tests the American NYSE market, the expected returns of a portfolios selection according

More information

News, Not Trading Volume, Builds Momentum

News, Not Trading Volume, Builds Momentum News, Not Trading Volume, Builds Momentum James Scott, Margaret Stumpp, and Peter Xu Recent research has found that price momentum and trading volume appear to predict subsequent stock returns in the U.S.

More information

Does the alternative three-factor model explain momentum anomaly better in G12 countries?

Does the alternative three-factor model explain momentum anomaly better in G12 countries? Does the alternative three-factor model explain momentum anomaly better in G12 countries? Steve Fan University of Wisconsin Whitewater Linda Yu University of Wisconsin Whitewater ABSTRACT This study constructs

More information

Book-to-Market Equity, Distress Risk, and Stock Returns

Book-to-Market Equity, Distress Risk, and Stock Returns THE JOURNAL OF FINANCE VOL. LVII, NO. 5 OCTOBER 2002 Book-to-Market Equity, Distress Risk, and Stock Returns JOHN M. GRIFFIN and MICHAEL L. LEMMON* ABSTRACT This paper examines the relationship between

More information