Behavioral FinanceEcon4370 Midterm 2 Review文档格式.docx

Behavioral FinanceEcon4370 Midterm 2 Review文档格式.docx

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1.MostimportantfindingofFF–Stockswithhigherbooktomarketratioshadhigherstockreturnsinthefollowing12months.（BookValue–Networthfigurementionedonthebalancesheet（Assets–Liabilities）MarketValue–Pricepershareofthestocktimesthenumberofsharesofstockoutstanding）

SeemstocontradictSemi-StrongEMHunlessthereisariskthatwasbeingrewardedwiththehigherreturns

2.Strongrelationbetweenreturns&

size:

smallcompanieshavehigherreturnsinaverage

3.TestCAPM:

theyfindthatBeta（relationshipbetweenthereturnsofthestockandthereturnsofthebroadmarket.）didn’treallymatterindeterminingfuturestockreturns:

Method:

Portfoliosinsizedeciles（withoutbreakingtheminto10betaportfolios）showarelationshipbetweenbetaandreturn

（Largesizemeanslowerbetaandlowerreturns）

Whensizedecilesaresubdividedintobetarankeddecileportfolios

Largersizefirmshavelowerreturns

“norelationbetweenaveragereturnandbeta”

（FF）ValueInvesting:

buyingstocksthathavelowpricescomparedtotheirearningsorbookvalue.

（LoserPortfolio–portfoliothatcontainsstockswhosereturnsweresignificantlybelowmarketaveragesinpriorperiods.）

反对：

DanielandTitman（DT）:

DTfoundthathighbook-to-marketstockshadmuchincommonbutanunknownriskfactorisnotoneofthecommonalities.Theconclusions:

FF’sresearchiscontrarytotheEMH.

Lakonishok,Vishny,Shleifer（LSV）:

LSVResearch–ValueversusGrowth

ValueStrategiesproducehigherreturnsbecausetheyarecontraryto“naï

ve”investors.Whentheybuythe“glamour”stocks,stocksthathavedoneverywellinthepastandareexpectedtoperformwellinthefuture,theybecomeoverpriced.（Glamourstocks=GrowthStocks）

Theirmainthrust:

“outoffavor”stocksbywhatevermeasurecanbeexpectedtooutperformthemarket

1）reproducetheresultsofFF,DBTresearch.

2）Valuestocksarenotriskierbecausetheyoutperforminallperiods

3）Valuestrategiesyieldhigherreturns（10percent）becausetheyexploitsuboptimalbehavioroftypicalinvestor:

individualcannotjudge,institutional:

thinksglamourstocksareprudent

（Extrapolation–tieexpectationstopastperformance）

thedebatebetweenFFandLSVismainlyaboutwhetherbook-to-marketrepresentedariskfactororasurprisetothemarketresultedfromoverreactionbymarketparticipants.Ifitisariskfactor,thenitisstillconsistentwithEMH.

DeBondt–Thaler（DBT）

Afteraperiodof“over-reaction,”markets“revert”backandgotheotherway.

Theirarticleisdesignedtotestwhetherornot“meanreversion”istrue/overreactionhypothesis:

1.extrememovementsinstockpriceswillbefollowedbysubsequentpricemovementsintheoppositedirection2.magnitude:

themoreextremethepricemovement,thegreaterwillbethepriceadjustment

Findings:

∙AlmostalloftheimpactisinJanuary（Ifnojaneffect,nomeanreversion）

∙WhentheWportfoliosareformed,theyhaveveryhighP/Eratios,theLportfolioshavelowP/Eratiosatthetimeofformation

∙Portfoliosofpriorloseroutperformpriorwinners（past3years）inthenext3years（meanreversion）（LportfoliosconsistentlyoutperformWportfolios:

19.6%betterthanthemarketafterendof3years;

Wportfoliosconsistentlyunderperformthemarket:

5%lessthanthemarketafterendof3years）

oBuy3yearloser,sell3yearswinners

∙LosersexperienceexceptionallylargeJanreturnsaslateas5yearsafterportfolioformation

∙Consistentwithoverreactionhypothesis

oOverreactioneffectasymmetricitisbiggerforlosersthanwinners

（TheOverreactionTheme,Investorsmaybenaive:

∙Marketstendtoovershoot.Goodnewssomewhatimmunetooccasionalbadnewsandeuphoriareigns,Badnewslongstringofbadnewsdramaticshiftofsentiment&

overreactiontakesplaceonthedownside.）

（Debondt-Thaler）ContrarianInvesting:

buyingstockthatotherpeopledon’tlike.

∙Basedonmeanreversion,atheorysuggestingthatpricesandreturnseventuallymovebacktowardsthemeanoraverage.Thismeanoraveragecanbethehistoricalaverageofthepriceorreturnoranotherrelevantaveragesuchasthegrowthintheeconomyortheaveragereturnofanindustry.

Reactiontothiswasnotmuchbecause

1.manythinkthatoncepublishedthepredictabilitywoulddisappearandafterallarbitrageclosesovertime.

2.Alsoastrongsuspicionthattheirresearchreliescriticallyupontheperformanceofsmallstocks,whicharenotthoughttobereliablebecauseofthintradeactivity.

TwotimesaredifferentbecauseFamaandFrenchwereardentdefendersofEMH,buttheyconfrontDeBondtandThaler,FFexplicitlyrejectmeanreversion.Theyfeltthattheirresultssuggestedthatthevariablesthatwereimportantinthepredictabilityofstockreturnssuchassizeandbooktomarket,weresimplyproxiesfortheriskthathadnotbeenidentified.

DifferencebetweenFFandDBTapproach

∙Lookingatpastpricestopredictthefutureisadifferentexercisethancomparingbookvaluestocurrentmarketprices.

ConradandKaul’s（CK）critiqueofDBT’sresearch

∙Upwardreturnbiasinsimpleone-periodreturncalculations.

∙Unbalanceportfolio–loserportfoliocontainedadisproptionatenumberofsmallcapstocks.

Momentum

Short-termuptrendsinpricesaresometimesdescribedasmomentum.

Inshortterm,risingstocksrisefurtherandfallingstocksfallfurther

BallandBrown（BB）:

EarningsMomentum:

Interestedinknowingifstockprices“anticipated”favorableandunfavorableearningsannouncements.

Havetodefine“unexpected”favorableandunfavorable.

Unexpectedincomechanges:

themainpredictorofafirm’sannouncedincomeistheaverageincomewithintheindustry.

Regressiontopredictearningsfromearningsofsimilarfirms–differencesrepresent“unexpected”favorableorunfavorable

Foundthat“marketbeginstoanticipateforecasterrorsearlyinthe12monthsprecedingtheearningsreport”…”andcontinueforapproximatelyonemonthafter.”Earningsdriftcontinuedforonemonthafter,sorecentuptrendsimpliedfutureuptrends（bothdirections）

NarasimhanJegadeeshandSheridanTitman（JT）:

TheJegadeesh-Titmanresearchconcludedthatstocksgenerallycontinuedupwardtrends,theylabelledthispricemomentum.Stocksthatperformedwellinthepast3-12monthstendedtoperformwelloverthenextthreeyears.

∙Buyingthelast6months’winnersandholdingforsixmonthsoutperformedmarketbenchmarksby12percentannually

∙ProfitabilityNOTduetosystematicriskordelayedpricereactions

∙After1yeareffectdissipates

∙Momentum/Relativestrengthtradingrule

oBaseyourpredictionsinthelast3-12months

Reason:

underreaction,peopleunderreacttounexpectedgoodearningsannouncement,thepositiveimpactofearningsfeedsintofuturestockpriceperformance.

TarunChordiaandLakshmananShivakumar（CS）tackledthesameissuesandconcludethatearningsmomentumswampspricemomentumandportfoliosmostsubjecttothisearningsmomentumcanbeviewedasariskfactorthatearnsariskpremium.（consistentwithEMH）

pricemomentumismerelyamanifestationoftheearningsmomentum

Ifpricemomentumholdsright,thentheweakformofEMHisfalse

Ifearningmomentumholdsright,itcouldbethatitrepresentsaunpricedriskfactor,soitcouldbeconsistentwiththeEMH.

Chan,Jegadeesh,Lakonishok（CJL）1996

Ingeneral,thepricemomentumeffecttendstobestrongerandlonger-livedthantheearningsmomentumeffect.

LL

Lookatnon-USdata

FindpriceearningsLSV

AgreegenerallywithChordia-Shivakumar

But,”weprovideadditionalevidencethatinternationalmomentumstrategiesappeartobemostlylimitedtohighlyilliquidstocks.”

ourevidencesupportstherationaleofmomentumbeingdrivenbyinvestors’underreactiontofundamentalnews.Moreover,weattributethepersistenceofthemomentumanomalytothefactthatsignificantarbitragecostspreventinvestorsfromitsexploitation.

Sadka,2005“RoleofLiquidityRisk”

Conclusion:

“theresultssuggestthatasubstantialpartofmomentumandPEAD（post-earnings-announcementdrift）returnscanbeviewedascompensationoftheunexpectedvariationsintheaggregateratioofinformedtraderstonoisetraders.”

“Unexpectedsystematicvariationsof（thevariablecomponentof）liquidtyareshowntobepricedwithinthecontextofmomentumandPEAD

CalendarEffects

Whethercalendaritselfhasanimpactonstockreturns,seasonalorcalendar-basedreturnpatternswouldseemtoviolatetheEMHbecauseitsuggestsinvestmentstrategiesthatcouldbenefitfrompastdata

LS

JanuaryEffects:

stockreturnsarehigherinJanuarythanintherestoftheyear;

Monthlyregularities:

VeryhighJanuaryreturnforsmallcompaniesbutnotlargecompanies.Consistentwiththepreviousfindings.

PossibleReasons:

1.Taxconsiderations–sellingastockatalosscanhelpyousavetax（happensinDecember）.ButtheninJanuarytheystocksdoingbadlybegintorecover.（Artificialtax-inducedsellingfirstforcethepricesdownmuchmorethanwarrantedandtheninJanuarythesesamestocksdobetterthanthemar