Academic Finance Research and Insights

Has the Stock Market Systematically Changed?

By |September 20th, 2022|

This time is almost always different, it seems, but the data suggest that things are typically always the same: chaotic and volatile. Stock market investors should be prepared for large short-term moves in stocks and they should be skeptical of narratives suggesting a causal relationship between environmental variables and future volatility.

Momentum Investing: How Did Momentum Investing Perform After the Previous Two Valuation Peaks?

By |September 16th, 2022|

How did Momentum investing perform after the previous two valuation peaks?

This article answers this question.

Key finding: Momentum investing also performed well following episodes when value stocks were cheap. Of course, momentum portfolios did not perform nearly as well as value portfolios, but they did still beat the generic market.

We dig into the details below.

The Short-Duration Equity Premium

By |September 15th, 2022|

We examine the short-duration premium using pre-scheduled economic, monetary policy, and earnings announcements. We provide high-frequency evidence that duration premia associated with revisions of economic growth and interest rate expectations are consistent with asset pricing models but cannot explain the short-duration premium. Instead, we show that the trading activity of sentiment-driven investors raises prices of long-duration stocks, which lowers their expected returns, and results in the short-duration premium. Long-duration stocks have the lowest institutional ownership, exhibit the largest forecast errors at earnings announcements, and show the highest mispricing scores.

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