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Momentum Trader
Momentum investing is a system of buying stocks or other security (finance), securities that have had high returns over the past three-to-twelve months, and selling those that have had poor returns over the same period. While momentum investing is well-established as a phenomenon no consensus exists about the explanation for this strategy, and economists have trouble reconciling momentum with the efficient market hypothesis and random walk hypothesis. Two main hypotheses have been submitted to explain the momentum effect in terms of an efficient market. In the first, it is assumed that momentum investors bear significant Financial risk, risk for assuming this strategy, and, therefore, the high returns are a compensation for the risk. Momentum strategies often involve disproportionately trading in stocks with high bid–ask spreads; thus, it is important to take transactions costs into account when evaluating momentum profitability. The second theory assumes that momentum investors a ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Stock
Stocks (also capital stock, or sometimes interchangeably, shares) consist of all the Share (finance), shares by which ownership of a corporation or company is divided. A single share of the stock means fractional ownership of the corporation in proportion to the total number of shares. This typically entitles the shareholder (stockholder) to that fraction of the company's earnings, proceeds from liquidation of assets (after discharge of all Seniority (financial), senior claims such as secured and unsecured debt), or Voting interest, voting power, often dividing these up in proportion to the number of like shares each stockholder owns. Not all stock is necessarily equal, as certain classes of stock may be issued, for example, without voting rights, with enhanced voting rights, or with a certain priority to receive profits or liquidation proceeds before or after other classes of Shareholder, shareholders. Stock can be bought and sold over-the-counter (finance), privately or on ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Sheridan Titman
Sheridan Dean Titman is a professor of finance at the University of Texas at Austin, where he holds the McAllister Centennial Chair in Financial Services at the McCombs School of Business. He received a B.S. degree (1975) from the University of Colorado and an M.S. (1978) and Ph.D. (1981) from Carnegie Mellon University. Career Titman previously taught at UCLA, where he was the chair for the department of finance. Between 1992 and 1994, he was one of the founding professors of the School of Business and Management at the Hong Kong University of Science and Technology. From 1994 to 1997, he served as the John J. Collins, S.J. Chair in Finance at Boston College. From 1988–89, Titman worked in Washington D.C. as the special assistant to the Treasury Assistant Secretary for Economic Policy. Titman's academic publications include articles on asset pricing, corporate finance, and real estate. Sheridan won the Smith-Breeden Prize for the best finance research paper published in ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Momentum (finance)
In finance, momentum is the empirically observed tendency for rising asset prices or securities return to rise further, and falling prices to keep falling. For instance, it was shown that stocks with strong past performance continue to outperform stocks with poor past performance in the next period with an average excess return of about 1% per month. Momentum signals (e.g., 52-week high) have been used by financial analysts in their buy and sell recommendations. The existence of momentum is a market anomaly, which finance theory struggles to explain. The difficulty is that an increase in asset prices, in and of itself, should not warrant further increase. Such increase, according to the efficient-market hypothesis, is warranted only by changes in demand and supply or new information (cf. fundamental analysis). Students of financial economics have largely attributed the appearance of momentum to cognitive biases, which belong in the realm of behavioral economics. The explanation is ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Market Anomaly
A market anomaly in a financial market is predictability that seems to be inconsistent with (typically risk-based) theories of asset prices. Standard theories include the capital asset pricing model and the Fama-French Three Factor Model, but a lack of agreement among academics about the proper theory leads many to refer to anomalies without a reference to a benchmark theory (Daniel and Hirschleifer 2015 and Barberis 2018, for example). Indeed, many academics simply refer to anomalies as "return predictors", avoiding the problem of defining a benchmark theory. Academics have documented more than 150 return predictors (see '' List of Anomalies Documented in Academic Journals).'' These "anomalies", however, come with many caveats. Almost all documented anomalies focus on illiquid, small stocks. Moreover, the studies do not account for trading costs. As a result, many anomalies do not offer profits, despite the presence of predictability. Additionally, return predictability decl ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Low-volatility Investing
Low-volatility investing is an investment style that buys Stock market, stocks or Security (finance), securities with low volatility and avoids those with high volatility. This investment style exploits the low-volatility anomaly. According to Capital asset pricing model, financial theory risk and return should be positively related, however in practice this is not true. Low-volatility investors aim to achieve market-like returns, but with lower risk. This investment style is also referred to as Minimum variance set, minimum volatility, Modern portfolio theory, minimum variance, managed volatility, smart beta, defensive and conservative investing. History The low-volatility anomaly was already discovered in the early 1970s, yet it only became a popular investment style after the 2008 global financial crises. The first tests of the Capital asset pricing model, Capital Asset Pricing Model (CAPM) showed that the risk-return relation was too flat. Two decades later, in 1992 the semina ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Investment Style
Investment style, is a term in investment management (and more generally, in finance), referring to how a characteristic investment philosophy is employed by an investor or fund manager. Investment Philosophies Aswath Damodaran Here, for example, one manager favors Small capitalization, small cap stocks, while another prefers large blue-chip stocks. The classification extends across asset classes — Stock, equities, Bond (finance), bonds or financial derivatives — and within each further weighs factors such as Leverage (finance), leverage, momentum investing, momentum, diversification (finance), diversification benefits, value stock, relative value or growth stock, growth prospects. Major style choices include the following: *Active vs. Passive: acti ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Factor Investing
Factor investing is an investment approach that involves targeting quantifiable firm characteristics or "factors" that can explain differences in stock returns. Security characteristics that may be included in a factor-based approach include size, low-volatility, value, momentum, asset growth, profitability, leverage, term and carry. A factor-based investment strategy involves tilting investment portfolios towards or away from specific factors in an attempt to generate long-term investment returns in excess of benchmarks. Proponents claim this approach is quantitative and based on observable data, such as stock prices and financial information, rather than on opinion or speculation. Factor premiums are also documented in corporate bonds and across all major asset classes including currencies, government bonds, equity indices, and commodities. Critics of factor investing argue the concept has flaws, such as relying heavily on data mining that does not necessarily translate to rea ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Carhart Four-factor Model
In Investment management, portfolio management, the Carhart four-factor model is an extra factor addition in the Fama–French three-factor model, proposed by Mark Carhart. The Fama-French model, developed in the 1990, argued most stock market returns are explained by three factors: risk, price (value investing, value stocks tending to outperform) and company size (smaller company stocks tending to outperform). Carhart added a Momentum (finance), momentum factor for asset pricing of stocks. The Four Factor Model is also known in the industry as the Monthly Momentum Factor (MOM). Momentum is the speed or velocity of price changes in a stock, security, or tradable instrument. Development The Monthly Momentum Factor (MOM) can be calculated by subtracting the equal weighted average of the lowest performing firms from the equal weighted average of the highest performing firms, lagged one month (Carhart, 1997). A stock would be considered to show momentum if its prior 12-month average ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Behavioral Economics
Behavioral economics is the study of the psychological (e.g. cognitive, behavioral, affective, social) factors involved in the decisions of individuals or institutions, and how these decisions deviate from those implied by traditional economic theory. Behavioral economics is primarily concerned with the bounds of rationality of economic agents. Behavioral models typically integrate insights from psychology, neuroscience and microeconomic theory. Behavioral economics began as a distinct field of study in the 1970s and 1980s, but can be traced back to 18th-century economists, such as Adam Smith, who deliberated how the economic behavior of individuals could be influenced by their desires. The status of behavioral economics as a subfield of economics is a fairly recent development; the breakthroughs that laid the foundation for it were published through the last three decades of the 20th century. Behavioral economics is still growing as a field, being used increasingly in ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Financial Crisis
A financial crisis is any of a broad variety of situations in which some financial assets suddenly lose a large part of their nominal value. In the 19th and early 20th centuries, many financial crises were associated with Bank run#Systemic banking crises, banking panics, and many recessions coincided with these panics. Other situations that are often called financial crises include stock market crashes and the bursting of other financial Economic bubble, bubbles, currency crisis, currency crises, and sovereign defaults. Financial crises directly result in a loss of paper wealth but do not necessarily result in significant changes in the real economy (for example, the crisis resulting from the famous tulip mania bubble in the 17th century). Many economists have offered theories about how financial crises develop and how they could be prevented. There is little consensus and financial crises continue to occur from time to time. It is apparent however that a consistent feature of bo ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Momentum Crash
A momentum crash is a sudden and significant decline in the performance of a momentum-based investment strategy, which involves buying assets that have shown an upward price trend and selling those with a downward trend. While this strategy can be profitable, it is also prone to sudden reversals that can result in large losses. These reversals can occur without warning, leading to a sharp drop in the value of the assets held by momentum investors. Momentum crashes often occur during periods of market stress or when market sentiment shifts rapidly. For example, if a market trending upwards suddenly declines, stocks that had been performing well can drop sharply, causing significant losses for momentum investors. These crashes are frequently seen during market corrections, when the overall market declines after a prolonged uptrend, leading to a significant drop in momentum stocks. Economic shifts can also trigger momentum crashes. Unexpected economic data or changes in economic co ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Post–earnings-announcement Drift
In financial economics and accounting research, post–earnings-announcement drift or PEAD (also named the SUE effect) is the tendency for a stock's cumulative abnormal returns to drift in the direction of an earnings surprise for several weeks (even several months) following an earnings announcement. This phenomenon is one of the oldest and most persistent capital market anomalies, with evidence dating back to the late 1960s. History and Discovery PEAD was first documented by Ball and Brown in their seminal 1968 study. They found that after an earnings announcement, stock prices continue to drift in the direction of the earnings surprise for an extended period, suggesting that market participants do not immediately incorporate all information from earnings announcements. This finding challenged the efficient market hypothesis, which implies that new information should be rapidly reflected in stock prices. The drift is quite persistent. Bernard and Thomas (1989) report that the ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
