Relation between discontinuous variation and stock return movement based on poisson process: Evidence from China

The (Bad?) Performance of Mutual Fund Investors

The persistence of performance of the General Equity Unit Trusts and All Unit Trusts that traded in South Africa during the period January 1988 to December 1997 and January 1993 to December 1997, is analysed using three models of performance measurement, namely the Capital Asset Pricing Model, a two-factor Arbitrage Pricing Theory model and a three-factor Arbitrage Pricing Theory (APT) model developed in this study. The Capital Asset Pricing Model does not explain the relative returns of the different portfolios. Both APT models account for almost all of the cross-sectional variation in expected returns. It is shown that there is evidence of both short-term and long-term persistence in performance of South African unit trusts. It appears that the worst performing unit trust portfolio tends to stay the worst performer. The portfolio of unit trusts with an average monthly return may eventually become the top performing portfolio, while the top performer over time tends to becomes an average performing portfolio.

Using data from Chinese stock markets, we examine the effect of speculative trading on stock returns. We develop a volume-related variable, abnormal turnover ratio (ATR), by isolating speculative trading from liquidity and other components in trading volume. After a group of tests verifying that ATR indeed represents speculative trading, we show that ATR negatively predicts future stock returns. The average monthly return spread between the top and bottom ATR deciles is −1.87%, suggesting a highly significant negative ATR premium. The return predictability of ATR survives after controlling for common risk factors and event-driven information shocks. These findings indicate that speculative trading affects asset prices.

The study is based on two main objectives. First, it aims to identify a portfolio of stocks as the most appropriate investment portfolio (AIP) for investors, specifically in the context of Pakistan. Second, this research intends to identify the characteristics of the portfolio which forms AIP. For this purpose, the researcher has formed sixteen time series portfolios, using Fama and French five factor model (2015). Beside marker factor, four risk factors have been constructed which include SMB, HML, RMW, and CMA. The results show that five portfolios which are BHRA, BLRA, BLRC, BHRC, and SHRA are appropriate investment portfolios for investors in Pakistan. Amongst these portfolios, BHRA earns highest monthly average returns of 1.17% having standard deviation of 9.13%, followed by BLRA with average monthly returns of 1.05% with standard deviation of 7.59%. The average return of BHRA is 11.4% higher than BLRA, whereas standard deviation of BHRA is almost 20% larger than the standard deviation of BLRA. Both, the average per month return and risk of BHRA are highest amongst all higher returns portfolios. Contrarily, the excess return of BLRA is not considerably low from BHRA but the incremental risk per unit return of BHRA is almost double of BLRA. Therefore, amongst all five appropriate portfolios, BLRA is justifiably the most appropriate investment portfolio which has the highest adjusted R-square of 77.106 %, the highest average returns of 1.053 % per month, and minimum risk of 7.5%. The results, therefore, suggests all investors to include big, low book/market, robust profitable, and aggressive investment stocks in their portfolios to earn above average returns with minimum risk.

Purpose – The purpose of this paper is to investigate whether mutual fund investors can make effective cash flow timing decisions and examine the sensitivity of these decisions to past fund performance using cash flow data at the individual fund level.Design/methodology/approach – This study examines performance persistence and investor timing ability of 200 domestic equity mutual funds in Taiwan between 1996 and 2009. In particular, a performance gap measuring the difference between dollar‐weighted average monthly returns and geometric average monthly returns is used to evaluate investors' timing ability.Findings – The empirical results show that funds that have performed well (poorly) in the previous year tend to continue performing well (poorly) in the following year, and investors' timing performance is negatively related to fund performance. The results also show that investors' timing performance is significantly and negatively related to fund size, length of fund history, and momentum‐style of fund...

Bond market seasonality and business cycles

The empirical test of cross sectional relationship between stock return and firm size in emerging stock markets seems hard to find in literature. Therefore, this study examines weather cross sectional relationship between stock return and firm size is exist on stocks returns in the Colombo stock market as an emerging capital market. All sample of stocks are formed into ten portfolios based on market capitalization and equally weighted average monthly portfolio return is calculated and assigned to respective decile portfolios at the end of each year. The existence of cross sectional relationship between stock return and firm size is tested by Fama and MacBeth (1973) two step procedure. The study concludes that there is a cross sectional relationship between stock return and firm size exist in the Colombo stock market during the study period and the finding consistent with the previous studies on USA and international markets.

This paper empirically analyzes the impact of hedge fund regulation on fund structure and performance. The data indicate restrictions on the location of key service providers and permissible distributions via wrappers are associated with lower fund alphas, lower average monthly returns, and higher fixed fees. Furthermore, restrictions on the location of key service providers are associated with lower manipulation‐proof performance measures, while wrapper distributions are associated with lower performance fees. As well, the data show standard deviations of monthly returns are lower among jurisdictions with restrictions on the location of key service providers and higher minimum capitalization requirements.

With Januaries (a month in which lagged “losers” typically outperform lagged “winners”) excluded, the average monthly return to a momentum strategy for U.S. stocks was found to be 59 bps for non-quarter-ending months but 310 bps for quarter-ending months. The pattern was stronger for stocks with high levels of institutional trading and was particularly strong in December. The results suggest that window dressing by institutional investors and tax-loss selling contribute to stock return momentum. Investors using a momentum strategy should focus on quarter-ending months and securities with high levels of institutional trading.

Understanding Foreign Exchange Option Returns: The Information Content of Volatility

Type and screen (T & S) and maximum surgical blood order schedule (MSBOS) have been successfully incorporated into transfusion medicine to efficiently utilize red blood cell (RBC) products during surgical operation. We investigated the volume of hemorrhage, the amount of ordered RBC products, and the amount of transfused RBC during and after surgery for three months. We also and introduced T & S and MSBOS practice into Kagawa Medical School Hospital in November, 1994. Various parameters before (July 1993-December 1993) and after (November 1994-February 1995) T & S and MSBOS introduction into our hospital were compared. The amount of RBC products used were similar throughout the period. Crossmatch to transfuse (C/T) ratio decreased from 3.4 to 1.9. The average monthly return of RBC products to the Red Cross Blood Center decreased from 273 to 59 units. The average monthly disposal of expired RBC products decreased from 34 to 17 units. Further, supplementary orders for RBC products during surgery were met within 15 minutes. Thus, introduction of T & S and MSBOS into Kagawa Medical School Hospital, allowed greater efficiency in the management of RBC products.

PurposeThrough a portfolio choice model, the study empirically examines the influence of the heuristic simplification through peak-end rule (PER) and the associated neglect of the duration of the experience. The portfolio strategy adopted involves optimizing portfolios to capture the impact of heuristic-driven investors' experience of good and bad states. The study attempts to validate PER in an empirical context and is expected to generate trading rules, which would exploit pricing errors emerging out of the use of heuristics by investors.Design/methodology/approachThe empirical approach adopted in the study primarily examines returns to portfolios sorted according to various hedonic evaluation rules. Behavioral portfolios are constructed using hedonic experiences as conditioning variables.FindingsThe results imply that there is continued investor demand for such assets in the short run. An equal weight portfolio based on a three-month hedonic evaluation earns an average monthly return of 2.77% over the next 12 months.Originality/valueThe authors’ study may perhaps be the first attempt to use the peak-end heuristic in portfolio construction.

China’s Hang Seng Index (HSI) represents the mature market, and its Shanghai Stock Exchange Composite Index (SSE), the emerging market. I utilize six market timing (MT) methods and one dollar cost average (DCA) method to invest in the two stock indexes respectively. It is assumed that investors make a series of monthly cash contributions to an equity index in the long term. They do not possess lump-sum cash and cannot borrow cash. They buy and hold equity till the end of an investment period. The DCA method is simple, and it is to invest every monthly cash contribution immediately in an equity index. The six MT methods are complicated, and they are to invest more (less) than the monthly cash contribution, under the cash constraint, if the equity price has declined (risen). Empirical tests have been conducted for the 5-year, 10-year, and 20-year rolling investments during 1991-2022. My findings show that for both the HSI and SSE, the net returns generated by the six MTs are similar to those created by the DCA. In addition, the differences (MT-DCA) in the average monthly returns and modified Sharpe ratios are either statistically insignificant or negative and significant. Therefore, regardless the differences between the Hong Kong and mainland China markets, the complicated MTs do not outperform the simple CA in China’s mature and emerging stock indexes.

Cross-Section of Option Returns and the Volatility Risk Premium

Option Returns and Volatility Mispricing