Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency

This paper documents that strategies which buy stocks that have performed well in the past and sell stocks that have performed poorly in the past generate significant positive returns over 3-to 12-month holding periods. We find that the profitability of these strategies are not due to their systematic risk or to delayed stock price reactions to common factors. However, part of the abnormal returns generated in the first year after portfolio formation dissipates in the following two years. A similar pattern of returns around the earnings announcements of past winners and losers is also documented.     

The Disposition to Sell Winners Too Early and Ride Losers Too Long: Theory and Evidence

One of the most significant and unique features in Kahneman and Tversky's approach to choice under uncertainty is aversion to loss realization. This paper is concerned with two aspects of this feature. First, we place this behavior pattern into a wider theoretical framework concerning a general disposition to sell winners too early and hold losers too long. This framework includes other elements, namely mental accounting, regret aversion, self-control, and tax considerations. Second, we discuss evidence which suggests that tax considerations alone cannot explain the observed patterns of loss and gain realization, and that the patterns are consistent with a combined effect of tax considerations and the three other elements of our framework. We also show that the concentration of loss realizations in December is not consistent with fully rational behavior, but is consistent with our theory.     

Volume for Winners and Losers: Taxation and Other Motives for Stock Trading

Capital gains taxes create incentives to trade. Our major finding is that turnover is higher for winners (stocks, the prices of which have increased) than for losers, which is not consistent with the tax prediction. However, the turnover in December and January is evidence of tax-motivated trading; there is a relatively high turnover for losers in December and for winners in January. We conclude that taxes influence turnover, but other motives for trading are more important. We were unable to find evidence that changing the length of the holding period required to qualify for long-term capital gains treatment affected turnover.     

Winners and Losers as Financial Service Providers Converge: Evidence from the Financial Modernization Act of 1999

The Financial Modernization Act of 1999 dramatically increased insurers' and investment banks' authority to provide an array of financial services and allowed commercial banks to offer investment banking and insurance services. In this paper we examine the market response to this legislation. We find a strong positive response among insurance companies and investment banks, and no significant response among commercial banks. Larger institutions in all three financial sectors earn higher abnormal returns. Additionally, better performing banks earn higher abnormal returns. Our results suggest that allowing financial convergence can add value through synergies and that large players are needed to exploit the scope economies.     

The Gender Gap in Housing Returns

Using detailed transactions data across the United States, we find that single women earn 1.5 percentage points lower annualized returns on housing relative to single men. Forty-five percent of the gap is explained by transaction timing and location. The remaining gap arises from a 2% gender difference in execution prices at purchase and sale. Consistent with a negotiation channel, women list for less and experience worse negotiated discounts. The gender gap shrinks in tight markets, where negotiation is replaced by quasi-auctions. Overall, gender differences in housing explain 30% of the gender gap in wealth accumulation for the median household.     

性别工资差距、资本积累与人口转变

本文通过在内生人口增长模型中引入性别工资差距随资本积累的演化过程,为解释人口转变提出了新的机制。经济发展初期,性别歧视程度较高,资本积累提高女性生育成本的效应较小,人口随收入上升加速增长;当资本积累最终导致性别歧视程度降低时,女性生育成本提高将促使家庭更多的投资人力资本,生育率持续下降。如果生产中物质资本份额和体力劳动比重越高,或者家庭存在性别偏好,那么人口转变的持续时间越长,程度越低。     

Entrepreneurial Spawning: Experience,Education, and Exit

We investigate the career dynamics of high‐tech entrepreneurs by analyzing the exit choice of entrepreneurs: to act as a business angel, to found another firm, or to become dependently employed. Our detailed data from CrunchBase indicate that founders are more likely to stick with entrepreneurship as a serial entrepreneur or as an angel investor in cases where the founder had prior experience either in founding other startups or working for a startup, or had a “jack‐of‐all‐trades” education.     

Characteristics, Covariances, and Average Returns: 1929 to 1997

The value premium in U.S. stock returns is robust. The positive relation between average return and book-to-market equity is as strong for 1929 to 1963 as for the subsequent period studied in previous papers. A three-factor risk model explains the value premium better than the hypothesis that the book-to-market characteristic is compensated irrespective of risk loadings.     

劳动力市场性别差距、生产结构转型与人口增长转变

本文从劳动力市场性别差距视角为理解生产结构转型与人口增长转变的互动关系提出了新的理论机制。以脑力劳动密集型生产部门比重提高为特征的生产结构转型将缩小性别工资差距,提高家庭生育养育机会成本并降低生育率,进而增加女性劳动相对供给,这又会进一步提高脑力劳动密集型生产部门比重。直接干预女性劳动定价政策可能会带来女性结构性失业,反而扩大劳动力市场性别差距,且不利于生产结构转型;单方面降低女性生育养育成本政策虽然能够提高生育率,但也可能产生类似不利影响;降低男性生育养育成本政策既可以提高生育率,又可以缩小劳动力市场性别差距,并促进生产结构转型;生育养育成本补贴支出由政府承担的影响比由企业承担更为温和。本文结果表明,促进人口长期均衡发展的政策应与缩小劳动力市场性别差距、推动生产结构转型的政策统筹谋划和协调推进。本文研究为“优化人口发展战略,建立生育支持政策体系”提供了一定的理论依据和参考。     

Human Capital Investment: The Returns from Education and Training to the Individual,the Firm and the Economy

This paper provides a non-technical review of the evidence on the returns to education and training for the individual, the firm and the economy at large. It begins by reviewing the empirical work that has attempted to estimate the true causal effect of education and training on individual earnings, focusing on the recent literature that has attempted to control for potential biases in the estimated returns to education and training. It then moves on to review the literature that has looked at the returns from human capital investments to employers. Lack of suitable data and methodological difficulties have resulted in a paucity of studies that have carried out sound empirical work on this issue. In the final part of the review, we look at the work that has tried to assess the contribution of human capital to national economic growth at the macroeconomic level. This work has generally involved using either a ‘growth accounting’ theoretical framework or ‘new growth’ theories. Although the empirical macroeconomic evidence that accompanies this work does not generally allow one to distinguish between the two approaches, there is a substantial body of evidence on the contribution of education to economic growth.     

Stock Returns,Expected Returns,and Real Activity

Measuring the total return variation explained by shocks to expected cash flows, time-varying expected returns, and shocks to expected returns is one way to judge the rationality of stock prices. Variables that proxy for expected returns and expected-return shocks capture 30% of the variance of annual NYSE value-weighted returns. Growth rates of production, used to proxy for shocks to expected cash flows, explain 43% of the return variance. Whether the combined explanatory power of the variables—about 58% of the variance of annual returns—is good or bad news about market efficiency is left for the reader to judge.     

Returns of Education in the Czech Republic

Prepared for presentation at the Congress of the International Institute of Public Finance (IIPF) in Seville, Spain, 28–31 August 2000, for the session on the opportunity-equalising effects of fiscal systems.University education is nowadays provided as public goods in the Czech Republic. Due to economic pressure on public finance the trend of the 90s became the internalisation of costs associated with university education.The generally accepted hypothesis is that nowadays the returns from the costs of university education are achieved in a shorter time than before economic transition. Additionally, it is thought that the return on university education is differentiated by professions. We aim to test these hypotheses. That is why the cornerstone of our study is the deeper analysis of the differentiation of selected professions in the current state in comparison to the period before transition.After 1989, due to the economic transition and development of the market economy, wage differentiation accelerated in the Czech Republic. An important factor in differentiation seems to be the level of human capital, represented above all by university education. Education significantly increased the chance of finding a job, as another analysis has proven. However, these positive effects of education have been paid for by considerable monetary and non-monetary costs.The paper provides an economic analysis at the level of an individual and his point of return between costs and revenues from university education. To achieve an exact but still simple analysis we take into account only quantifiable monetary costs and revenues. The calculation of the point of return is done with the use of the construction of a cumulated whole-life income and its interpolation. The analysis uses data for the Czech Republic in 1988 and 1997.     

Why Hang on to Losers? Divestitures and Takeovers

We study the divestiture decisions of managers who care about their reputations. Managers' divestiture and investment decisions are publicly observable, but managers privately observe signals with respect to the future payoff distribution of investments they have initiated. We establish that in equilibrium there is too little divestiture. These inefficiencies create the opportunity for wealth-enhancing divestiture-motivated takeovers. A key result is that only managers of targets with “middle of the road” asset specificity should consider the takeover threat credible. These findings suggest that uniqueness of assets is an important determinant of both agency costs and takeover activity. Our analysis leads to several empirical predictions.     

Institutional Influence,Transition Management and the Demand for Carbon Auditing: The Chinese Experience

The primary objective of this study is to investigate factors associated with the increase in demand for carbon auditing in China. Based on an analysis of publicly available carbon‐related information and data, the paper documents the large amount of carbon auditing that occurred in the public sector during the period 2009–2013. We find that the creation of carbon institutions and the significant increase in governmental green funding were the main reasons for the emergence of carbon auditing in this period. The change in models of economic development attempting to balance GDP growth and ecosystem protection, in addition to institutional reform, has led carbon auditing from rhetoric to practice. In addition, we show that carbon auditing serves as a tool for the management of transitions and the governance of sustainable socio‐technical and organisational innovation and transformation.     

Asset Returns and Inflation in Response to Supply,Monetary, and Fiscal Disturbances

This paper identifies sources of asset returns (stock returns and interest rates) and inflation relations. We find that the relation between asset returns and inflation is driven by three types of disturbances to the economy. We interpret them as due to supply disturbances and two types of demand—monetary and fiscal—disturbances. In post-war U.S. data, supply and fiscal disturbances drive a negative stock return-inflation relation, whereas monetary disturbances generate a positive stock return-inflation relation. However, all three types of disturbances generate a negative interest rate-inflation relation. Depending on the interaction of the three types of shocks, we observe different correlations between asset returns and inflation in post- and pre-World War II U.S. data.     

Private Equity Performance: Returns, Persistence, and Capital Flows

This paper investigates the performance and capital inflows of private equity partnerships. Average fund returns (net of fees) approximately equal the S&P 500 although substantial heterogeneity across funds exists. Returns persist strongly across subsequent funds of a partnership. Better performing partnerships are more likely to raise follow‐on funds and larger funds. This relationship is concave, so top performing partnerships grow proportionally less than average performers. At the industry level, market entry and fund performance are procyclical; however, established funds are less sensitive to cycles than new entrants. Several of these results differ markedly from those for mutual funds.     

Returns to scale and asset prices

The q‐theory of investment is proposed to explain firm growth effects, where previous papers identify a negative effect of firm growth, including asset growth, real investment and net share issuance, on future stock returns. This paper uses returns to scale from the production function to test the dynamic q‐theory, which predicts that the firm growth effect is theoretically weaker for firms with decreasing returns to scale (DRS) than for non‐DRS firms. Our empirical results generally support the prediction of dynamic q‐theory. However, we find that the dynamic q‐theory explains little of the value, momentum and ROE effects from the standpoint of returns to scale.     

Returns to Retail Banking and Payments

The present paper examines the fundamental relationship between the country-level infrastructure of the retail payment market and overall bank performance. Using data from across 27 European markets over the period 2000–07, the results confirm that the performance of banks in countries with more developed retail payment service markets is better. This relationship is stronger in countries with a relatively high adoption of retail payment transaction technologies. Retail payment transaction technology itself can also improve bank performance, and evidence shows that heterogeneity in retail payment instruments is associated with enhanced bank performance. Similarly, higher usage of electronic retail payment instruments seems to stimulate banking business. We also show that retail payment services have a more significant impact on savings and cooperative bank performance, although they have a positive influence on the performance of commercial banks as well. Additionally, the findings reveal that the impact of retail services on bank performance is more pronounced through fee income, although their impact through interest income is also positive. Finally, an effective payment service market is found to be associated with higher bank stability. Our findings are robust to different regression specifications.     

Volatility Clustering, Asymmetry and Hysteresis in Stock Returns: International Evidence

Encompassing a very broad family of ARCH-GARCH models, we show that the AT-GARCH (1,1) model, where volatility rises more in response to bad newsthan to good news, and where news are considered bad only below a certain level, is a remarkably robust representation of worldwide stock market returns. The residual structure is then captured by extending ATGARCH (1,1) to an hysteresis model, HGARCH, where we modelstructured memory effects from past innovations. Obviously, this feature relates to the psychology of the markets and the way traders process information. For the French stock market we show that votalitity is affected differently, depending on the recent past being characterized by returns all above or below a certain level. In the same way a longer term trend may also influence volatility. It is found that bad news are discounted very quickly in volatility, this effect being reinforced when it comes after a negative trend in the stock index. On the opposite, good news have a very small impact on volatility except when they are clustered over a few days, which in this case reduces volatility.