Dissecting Anomalies

The anomalous returns associated with net stock issues, accruals, and momentum are pervasive; they show up in all size groups (micro, small, and big) in cross-section regressions, and they are also strong in sorts, at least in the extremes. The asset growth and profitability anomalies are less robust. There is an asset growth anomaly in average returns on microcaps and small stocks, but it is absent for big stocks. Among profitable firms, higher profitability tends to be associated with abnormally high returns, but there is little evidence that unprofitable firms have unusually low returns.     

Equilibrium "Anomalies"

Many empirical “anomalies” are actually consistent with the single beta capital asset pricing model if the empiricist utilizes an equity‐only proxy for the true market portfolio. Equity betas estimated against this particular inefficient proxy will be understated, with the error increasing with the firm's leverage. Thus, firm‐specific variables that correlate with leverage (such as book‐to‐market and size) will appear to explain returns after controlling for proxy beta simply because they capture the missing beta risk. Loadings on portfolios formed on relative leverage and relative distress completely subsume the powers of the Fama and French (1993) returns to small minus big market capitalization (SMB) portfolios and returns to high minus low book‐to‐market (HML) portfolios factors in explaining cross‐sectional returns.     

Anomalies and financial distress

This paper explores commonalities across asset pricing anomalies. In particular, we assess implications of financial distress for the profitability of anomaly-based trading strategies. Strategies based on price momentum, earnings momentum, credit risk, dispersion, idiosyncratic volatility, and capital investments derive their profitability from taking short positions in high credit risk firms that experience deteriorating credit conditions. In contrast, the value-based strategy derives most of its profitability from taking long positions in high credit risk firms that survive financial distress and subsequently realize high returns. The accruals anomaly is an exception. It is robust among high and low credit risk firms in all credit conditions.     

Competing Theories of Financial Anomalies

We compare two competing theories of financial anomalies: "behavioral"theories built on investor irrationality, and "rational structuraluncertainty" theories built on incomplete information aboutthe structure of the economic environment. We find that althoughthe theories relax opposite assumptions of the rational expectationsideal, their mathematical and predictive similarities make themdifficult to distinguish. Even if irrationality generates financialanomalies, their disappearance still may hinge on rational learning—thatis, on the ability of rational arbitrageurs and their investorsto reject competing rational explanations for observed pricepatterns.     

Multifactor Explanations of Asset Pricing Anomalies

Previous work shows that average returns on common stocks are related to firm characteristics like size, earnings/price, cash flow/price, book-to-market equity, past sales growth, long-term past return, and short-term past return. Because these patterns in average returns apparently are not explained by the CAPM, they are called anomalies. We find that, except for the continuation of short-term returns, the anomalies largely disappear in a three-factor model. Our results are consistent with rational ICAPM or APT asset pricing, but we also consider irrational pricing and data problems as possible explanations.     

Anomalies and stock returns: Australian evidence

Prior research has identified the existence of several cross‐sectional patterns in equity returns, commonly referred to as effects. This paper tests for the existence of a number of well‐known effects using data from the Australian equities market. Specifically, we investigate the size effect, book‐to‐market effect, earnings‐to‐price effect, cashflow‐to‐price effect, leverage effect and the liquidity effect. An additional aim of this paper is to investigate the capability of the Fama–French model in explaining any observed effects. We document a size, book‐to‐market, earnings‐to‐price and cashflow‐to‐price effect but fail to find evidence of a leverage or liquidity effect. Although our findings indicate that the Fama–French model can partially explain some of the observed effects, we conclude that its performance is less than satisfactory in Australia.     

Anomalies in the Oversight of Australian Auditors

This commentary identifies and comments on anomalies in the oversight of Australian auditors and audit firms. Regulatory and professional oversight and inspection of Australian auditors and audit firms arise from a number of sources, highlighting its multi‐faceted nature. This makes it impossible to identify a single body with ultimate responsibility for auditor oversight. Three recent Australian reviews commissioned by the Financial Reporting Council, together with an evaluation of the roles of the various regulatory and professional bodies, are used in this commentary as a platform from which to identify a number of significant anomalies in oversight processes. Major anomalies highlighted arise from the overlapping nature of the duties and functions of the various bodies and the variation in oversight across different categories of audit service providers. Policymakers should closely examine the issues raised in the paper if auditor oversight is to be undertaken in an effective and efficient manner.     

Anomalies: Is it the Economy?

There is still no consensus on whether small firm or value stock anomalies exist. We examine the last half of the 20th century and apply a six‐factor macroeconomic model to test for the presence of these abnormal returns. Using four proxies for value, we find that detecting this anomaly is sensitive to choice of proxy, the magnitude of the abnormal returns varies over time, and the anomaly does not persist through time. Additional tests provide evidence that abnormal returns for small, value‐oriented, and growth‐oriented firms differ significantly under restrictive versus expansive monetary policy regimes.     

Asset Pricing Models and Financial Market Anomalies

This article develops a framework that applies to single securitiesto test whether asset pricing models can explain the size, value,and momentum anomalies. Stock level beta is allowed to varywith firm-level size and book-to-market as well as with macroeconomicvariables. With constant beta, none of the models examined captureany of the market anomalies. When beta is allowed to vary, thesize and value effects are often explained, but the explanatorypower of past return remains robust. The past return effectis captured by model mispricing that varies with macroeconomicvariables.     

Size and Value Anomalies under Regime Shifts

This paper finds strong evidence of time-variations in the jointdistribution of returns on a stock market portfolio and portfoliostracking size- and value effects. Mean returns, volatilitiesand correlations between these equity portfolios are found tobe driven by underlying regimes that introduce short-run markettiming opportunities for investors. The magnitude of the premiaon the size and value portfolios and their hedging propertiesare found to vary across regimes. Regimes are shown to havea large impact both on the optimal asset allocation—especiallyunder rebalancing—and on investors' utility. Regimes alsohave a considerable impact on hedging demands, which are positivewhen the investor starts from more favorable regimes and negativewhen starting from bad states. Recursive out-of-sample forecastingexperiments show that portfolio strategies based on models thataccount for regimes dominate single-state benchmarks.     

From T-Bills to Stocks: Seasonal Anomalies Revisited

This paper employed eleven data series which consist of stocks, bonds, bills, equity premiums, term premiums, and various default premiums to investigate whether January seasonality reported in existing literature is robust across different states of the economy as this has important trading implications. For the periods 1926–1990, small stocks, small stock premiums, low grade bonds, and default premiums (spread between high grade, low grade and government bonds) reveal January seasonality and that the seasonality is robust across different states of the economy except for low grade bond returns and default premiums. January seasonality for low grade bond returns and low grade bond default premiums are primarily driven by results found during periods of economic expansion. Overall, January seasonality is more evident during the economic expansion periods although the magnitude of default premiums is larger during periods of economic contraction. Furthermore, prior findings of strong summer equity returns are primarily driven by the results found during the periods of economic contraction. It is also found that equity returns are generally higher during periods of economic expansion.     

An Analysis of Covariance Risk and Pricing Anomalies

This article examines the link between several well-known assetpricing "anomalies" and the covariance structure of returns.I find size, book-to-market, and momentum strategies exhibita strong, weak, and negligible relation to covariance risk,respectively. A size factor helps predict future volatilityand covariation, improving the efficiency of investment strategies.Moreover, its premium rises following increases in both itsvolatility and covariation with other assets. These effectsare amplified in recessions. No such relations exist for book-to-marketor momentum. These findings may shed light on explanations forthese premia and present a challenging set of facts for futuretheory.     

The Impact of Bid-Ask Prices on Market Anomalies

A substantial body of literature on security market anomalies has evolved since the articulation of the efficient markets hypothesis. These anomalies include the size, January, and weekend effects. The evidence of such anomalies has been based upon returns computed from closing prices. Although readily available, analysis of closing prices may not reflect returns obtainable by public traders utilizing market orders to execute trades. We have demonstrated elsewhere that returns computed from closing prices are biased upward compared with returns that would have resulted from using market orders. This study reexamines the evidence on two market anomalies using returns generated in a manner more consistent with the actual returns available to actual market participants.     

An Empirical Portfolio Perspective on Option Pricing Anomalies

We empirically study the economic benefits of giving investorsaccess to index options in the standard portfolio problem, analyzingboth expected-utility and nonexpected-utility investors in orderto understand who optimally buys and sells options. Using dataon S&P 500 index options, CRRA investors find it alwaysoptimal to short out-of-the-money puts and at-the-money straddles.The option positions are economically and statistically significantand robust to corrections for transaction costs, margin requirements,and Peso problems. Loss-averse and disappointment-averse investorsalso optimally hold short option positions. Only with highlydistorted probability assessments can we obtain positive portfolioweights for puts (cumulative prospect theory and anticipatedutility) and straddles (anticipated utility).     

Calendar Anomalies: The Case of International Property Shares

In this paper we analyze the price dynamics of international property shares for the ten most prominent markets from around the world plus South-Africa. We focus on the presence of calendar effects in daily and monthly price returns and examine these effects both over time and across countries. For the daily returns we find price anomalies for Fridays and Mondays in all markets. Friday returns tend to be the highest of the week, while Mondays are weakest. We find that these patterns were most prominent during the 1980s and early 1990s and in the smaller markets in our sample. For the monthly returns we found little evidence for price irregularities. In most cases January was superior to most other months, but these differences lacked statistical significance. More interesting was the sell in May effect that seemed to be present in ten out of 11 markets. Price returns during the winter season outperformed the summer months and in five countries these difference were both economically and statistically significant. Finally, we looked at firm level returns to isolate the drivers of these infamous calendar effects. The day-of-the-week effect appears to be most pronounced among small and young firms that have little or no institutional investors. Large and long-established listed real estate firms with a large portion of loyal block-holders experience no significant price patterns during the trading week.

Stock Return Anomalies and the Tests of the APT

This paper shows that the empirical tests of the Arbitrage Pricing Theory (APT) model are very sensitive to the anomalies observed in January in the stock returns data. There is a strong seasonal pattern in the estimates of the risk premia from the APT model. The most important implication of the findings in this paper is that the APT model can explain the risk-return relation mostly for January. Once the January returns are excluded from the data, there is no significant relation between the expected stock returns and the risk measures predicted by the APT model.     

选择性关注、鸵鸟效应与市场异象

基于认知心理学视角,本文研究了投资者对于信息的选择性关注程度对市场异象的影响效应,并在不同的市场态势下检验了这种影响效应的动态变化。研究发现:(1)投资者关注显著影响股票的横截面收益,其中价格反转收益与投资者关注显著正相关,而盈余惯性收益与投资者关注显著负相关;(2)基于投资者关注的认知状态差异,我国资本市场存在"鸵鸟效应",即价格反转收益在牛市比熊市更强,而盈余惯性收益在熊市比牛市更强。本文的研究结论证实了"投资者关注"假设,为投资者和监管层了解市场异象形成的关键驱动因素及其形成机理提供帮助。     

真实的补贴

4月6日,湖南金健米业股份有限公司发布公告称收到财政补贴。根据常德市财政局《关于下达‘支持国家级农业产业化龙头企业发展资金’的通知》,金健米业获得2000万元补贴,专项用于公司已投入的优质米种植基地推广及其产业化项目。     

Real Estate Risk Exposure of Equity Real Estate Investment Trusts

This study examines the linkage between equity real estate investment trust (REIT) returns and the private real estate factor. The results reveal a tighter connection between REIT and the private real estate market starting from 1993. In addition, large-cap REITs seem to behave more like real estate than do small-cap REITs. Overall, the results are consistent with three notions: (1) that institutional investors provide information-gathering services (Bradrinath et al., Rev. Financ. Stud., 8:401–430, 1995), (2) that a more sophisticated investor base improves information flow, and (3) that a high degree of participation from institutional investors strengthens the linkage between REIT returns and the underlying real estate factor (Ziering et al., The evolution of public and private market investing in the new real estate capital markets, Prudential Real Estate Investors, Parsippany, NJ, 1997).