scholarly journals Investment Strategies, Performance, And Trading Information Impact

2011 ◽  
Vol 4 (9) ◽  
Author(s):  
Tov Assogbavi ◽  
Johnston E. Osagie ◽  
Larry A. Frieder ◽  
Jong-Kyun Shin
Keyword(s):  
Stock Returns ◽  
Strong Evidence ◽  
Trading Volume ◽  
High Volume ◽  
Investment Strategy ◽  
Volume Effect ◽  
Bad News ◽  
Portfolio Construction ◽  
Investment Strategies ◽  
Canadian Market

This paper examines a set of investment strategies based on past market information to evaluate performance and trading impact on the Canadian Market. In doing so, we assess whether trading information adds value to the effectiveness of these strategies. Utilizing variant models of four different methodologies, we find strong evidence that supported the Momentum Investment Strategy, which buys past winner stocks and sells past loser stocks. Our evidence did not support Contrarian Investment Strategy, which posits that investors overreact to good and bad news. Our winners portfolios outperform our losers portfolios. The Negative Volume Effect Strategy did not work, which is contrary to the Foerster, Prihar and Schmitz (1995) study. We found that winners stocks did not reverse in cases of heavy volume; nor did loser stocks reverse in a high volume context. However, we did find that trading information has an impact on stock returns and thus adds value to investment strategies for the 1990 to 2000 investment period. Investors who combine past price and trading volume information in constructing their investment strategies would achieve higher returns than investors who base their portfolio construction decisions solely on stock prices.University.

scholarly journals Portfolios Effective Time Formation/Holding Period Based On Momentum Investment Strategy

2011 ◽  
Vol 7 (5) ◽  
Author(s):  
Tov Assogbavi ◽  
Bridget Leonard
Keyword(s):  
Strong Evidence ◽  
Investment Strategy ◽  
Portfolio Construction ◽  
Market Information ◽  
Short Term ◽  
Holding Period ◽  
Effective Time ◽  
Performance Time ◽  
Canadian Market

This paper examines the momentum investment strategy based on past market information to evaluate performance, time formation/holding period and seasonality impact on the Canadian Market. In doing so, we assess the effectiveness of portfolio formation and holding periods of this strategy. Utilizing variant models of different methodologies, we find strong evidence that assesses a 9 month formation and a 9 month holding period as the most effective formation/holding period in implementing a Momentum Investment Strategy when the formation period begins in January. We also find that regardless of when the formation period begins, the most effective portfolio will be held for 9 months beginning in October. While these findings confirm the short term nature of this investment strategy, they however differ in terms of the length of formation/holding periods commonly utilized in the literature. The shortness of the actual effective formation/holding periods may be caused mainly by the growing knowledgeable participants in the market. Investors who base their portfolio construction on momentum investment strategy would achieve higher returns by shortening their portfolio formation/holding periods.

Dividend Buying: Linking Dividend Announcements and Ex-Dividend Day Effects

1995 ◽  
Vol 10 (3) ◽  
pp. 421-435 ◽  
Author(s):  
Helen M. Bowers ◽  
Donald Fehrs
Keyword(s):  
Stock Returns ◽  
Trading Volume ◽  
Abnormal Returns ◽  
Investment Strategy ◽  
Short Term ◽  
Return Variance ◽  
Dividend Announcements ◽  
Abnormal Volume ◽  
Abnormal Stock Returns ◽  
Short Term Investment

We provide a plausible explanation for earlier findings that positive abnormal stock returns associated with dividend announcements persist for several days and that abnormal volume and stock returns commence several days before a stock's ex-dividend day. This study links these two sets of findings to the short-term investment strategy of dividend buying by relating the abnormal returns and trading volume to individual stock characteristics favored by dividend buyers, namely the stock's return variance and dividend yield. We conclude that dividend buying is at least partially responsible for the abnormal returns and volume found between dividend announcement and ex-dividend days.

THE IMPACT OF SAVINGS WITHDRAWALS ON A BANKER’S CAPITAL HOLDINGS SUBJECT TO BASEL III ACCORD

2020 ◽  
Vol 15 (02) ◽  
pp. 2050006
Author(s):  
RYLE S. PERERA ◽  
KIMITOSHI SATO
Keyword(s):  
Stock Returns ◽  
Optimal Investment ◽  
Investment Strategy ◽  
Short Selling ◽  
Terminal Condition ◽  
Capital Regulation ◽  
Basel Iii ◽  
Investment Strategies ◽  
The Impact ◽  
Mean Variance

In this paper, we analyze the impact of savings withdrawals on a bank’s capital holdings under Basel III capital regulation. We examine the interplay between savings withdrawals and the investment strategies of a bank, by extending the classical mean–variance paradigm to investigate the bankers optimal investment strategy. We solve this via an optimization problem under a mean–variance paradigm, subject to a quadratic optimization function which incorporates a running penalization cost alongside the terminal condition. By solving the Hamilton–Jacobi–Bellman (HJB) equation, we derive the closed-form expressions for the value function as well as the banker’s optimal investment strategies. Our study provides a novel insight into the way banks allocate their capital holdings by showing that in the presence of savings withdrawals, banks will increase their risk-free asset holdings to hedge against the forthcoming deposit withdrawals whilst facing short-selling constraints. Moreover, we show that if the savings depositors of the bank are more stock-active, an economic expansion will imply a greater reduction in bank savings. As a result, the banker will reduce his/her loan portfolio and will depend on high stock returns with short-selling constraints to conform to Basel III capital regulation.

The Real Side of the High-Volume Return Premium

2021 ◽  
Author(s):  
Doron Israeli ◽  
Ron Kaniel ◽  
Suhas A. Sridharan
Keyword(s):  
Stock Returns ◽  
Trading Volume ◽  
Financial Constraints ◽  
High Volume ◽  
Cash Flows ◽  
Positive Relation ◽  
Trading Activity ◽  
Earnings Information ◽  
Prior Literature ◽  
Corporate Actions

Prior literature demonstrates that increased trading activity of a firm’s stock is associated with abnormal future stock returns (the high-volume return premium) and interprets this phenomenon as evidence that increased visibility generates reductions in cost of capital. Motivated by this interpretation, we investigate whether increased trading activity entails changes in real corporate actions. We document a positive relation between abnormal trading volume, future investment expenditures, and financing cash flows. This positive relation is not subsumed by the arrival of investment-related news or other corporate disclosures or by subsequent earnings information and is concentrated among firms with high financial constraints and firms with lower levels of investor recognition. This paper was accepted by David Simchi-Levi, finance.

scholarly journals The Impact Of Trading Volume On Portfolios Effective Time Formation/Holding Periods Based On Momentum Investment Strategies

2011 ◽  
Vol 10 (7) ◽  
pp. 1
Author(s):  
Tov Assogbavi ◽  
Martin Giguere ◽  
Komlan Sedzro
Keyword(s):  
Trading Volume ◽  
Selection Process ◽  
High Volume ◽  
Investment Strategies ◽  
Momentum Strategy ◽  
Holding Period ◽  
Effective Time ◽  
Price Momentum ◽  
Time Period ◽  
The Impact

This paper analyzes momentum investment strategies based on past market data to evaluate the impact of trading volume on price momentum for the Canadian Stock Market. Utilizing variant models of Jegadeesh and Titman (1993) and Lee and Swaminathan (2000), we evaluate the effective time formation/holding periods of portfolios using both past price and trading volume. The findings suggest that taking high trading volume into consideration in momentum investment strategies on the TSX between 1996 to 2004 generally outperformed a strictly price-based momentum strategy for both winners (t= 2.118, p< .05) and losers (t= 2.174, p< .05). The most effective time period for a winning-high-volume portfolio was nine months of formation, starting in April and a 3-month holding period. The holding period is shorter by six months compared to what is suggested by Assogbavi, et al. (2008). In addition, high-volume portfolios consistently bettered low-volume portfolios for both winners (t= 4.121, p< .001) and losers (t= 3.956, p< .001). For investors who base their portfolio construction on momentum investment strategies, these findings suggest that it would be wise to incorporate past trading volume in their selection process.

Market earnings expectation, measurement error in analysts’ consensus forecasts and prediction of stock returns

2018 ◽  
Vol 31 (2) ◽  
pp. 249-266
Author(s):  
Jung Hoon Kim
Keyword(s):  
Measurement Error ◽  
Stock Returns ◽  
Capital Markets ◽  
Investment Strategy ◽  
Price Ratio ◽  
Investment Strategies ◽  
Cross Sectional ◽  
Content Type ◽  
Consensus Forecasts ◽  
Earnings Expectation

Purpose In capital markets research, analysts’ consensus forecasts are widely used as a proxy for unobservable market earnings expectation. However, they measure the market earnings expectation with error that may vary cross-sectionally, as the market does not consistently rely on analysts’ consensus forecasts to form earnings expectation (Walther, 1997). Based on this notion, this paper aims to relate the prediction of future stock returns to the cross-sectional variation of the error in measuring market earnings expectation embedded in analysts’ consensus forecasts. Design/methodology/approach This study uses empirical analyses based on stock returns and annual analysts’ consensus forecasts. Findings Based on the analytical work by Abarbanell et al. (1995), this study reports that when the measurement error in annual analysts’ consensus forecasts is the smallest, forward earnings-to-price ratio (constructed with annual analysts’ consensus forecasts) best explains future stock returns, and the forward earnings-to-price ratio-based investment strategy is the most profitable. Originality/value Findings of this study are useful to capital markets research that relies on the market earnings expectation and to practitioners seeking more profitable investment strategies.

Information Content of Skewness Risk Premium

2018 ◽  
Vol 26 (4) ◽  
pp. 391-423
Author(s):  
Seok Goo Nam ◽  
Byung Jin Kang
Keyword(s):  
Stock Returns ◽  
Risk Premium ◽  
Asset Returns ◽  
Investment Strategy ◽  
Investment Strategies ◽  
Option Prices ◽  
Underlying Asset ◽  
Variance Risk Premium ◽  
The Difference ◽  
Variance Risk

The variance risk premium defined as the difference between risk neutral variance and physical variance is one of the most crucial information recovered from option prices. It does not, however, reflect the asymmetry in upside and downside movements of underlying asset returns, and also has limitation in reflecting asymmetric preference of investors over gains and losses. In this sense, this paper decomposes variance risk premium into downside - and upside-variance risk premium, and then derives the skewness risk premium and examines its effectiveness in predicting future underlying asset returns. Using KOSPI200 option prices, we obtained the following results. First, we found out that the estimated skewness risk premium has meaningful forecasting power for future stock returns, while the estimated variance risk premium has little forecasting power. Second, by utilizing our results of skewness risk premium, we developed a profitable investment strategy, which verifies the effectiveness of skewness risk premium in predicting future stock returns. In conclusion, the empirical results of this paper can contribute to the literature in that it helps us understand why variance risk premium, in most global markets except the US market, has not been successful in forecasting future stock returns. In addition, our results showing the profitability of investment strategies based on skewness risk premium can also give important implications to practitioners.

scholarly journals High-Volume Return Premium And Volume-Liquidity Premium

2012 ◽  
Vol 11 (1) ◽  
pp. 35
Author(s):  
Megan Y. Sun
Keyword(s):  
Stock Returns ◽  
Trading Volume ◽  
High Volume ◽  
Font Size ◽  
Liquidity Premium ◽  
Normal Text ◽  
Two Factors ◽  
Low Volume

<span style="font-family: Times New Roman; font-size: small;"> </span><p style="margin: 0in 0.5in 0pt; line-height: normal; text-indent: 0in; mso-pagination: none;" class="normal15"><span style="color: black; font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 10pt; mso-themecolor: text1;">This study investigates </span><span style="color: black; font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 10pt; mso-themecolor: text1; mso-fareast-language: ZH-CN;">the interaction of </span><span style="color: black; font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 10pt; mso-themecolor: text1;">volume-liquidity premium and high-volume return premium </span><span style="color: black; font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 10pt; mso-themecolor: text1; mso-fareast-language: ZH-CN;">by</span><span style="color: black; font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 10pt; mso-themecolor: text1;"> </span><span style="color: black; font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 10pt; mso-themecolor: text1; mso-fareast-language: ZH-CN;">simultaneously </span><span style="color: black; font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 10pt; mso-themecolor: text1;">consider</span><span style="color: black; font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 10pt; mso-themecolor: text1; mso-fareast-language: ZH-CN;">ing</span><span style="color: black; font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 10pt; mso-themecolor: text1;"> two factors that significantly impact future stock returns: trading volume norms and trading volume extremes.<span style="mso-spacerun: yes;"> </span>The study finds that high-volume return premium does exist. However, the high-volume return premium behaves differently for liquid and illiquid stocks.<span style="mso-spacerun: yes;"> </span>The high-volume return premium disappears very quickly </span><span style="color: black; font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 10pt; mso-themecolor: text1; mso-fareast-language: ZH-CN;">for illiquid </span><span style="color: black; font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 10pt; mso-themecolor: text1;">stocks, while it persists</span><span style="color: black; font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 10pt; mso-themecolor: text1; mso-fareast-language: ZH-CN;"> much</span><span style="color: black; font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 10pt; mso-themecolor: text1;"> longer for </span><span style="color: black; font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 10pt; mso-themecolor: text1; mso-fareast-language: ZH-CN;">highly liquid </span><span style="color: black; font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 10pt; mso-themecolor: text1;">stocks. The study also shows evidence that supports volume-liquidity premium.<span style="mso-spacerun: yes;"> </span>But the volume-liquidity premium behaves differently after stocks experience an extremely high/low volume shock.<span style="mso-spacerun: yes;"> </span>The volume-liquidity premium only exists for </span><span style="color: black; font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 10pt; mso-themecolor: text1; mso-fareast-language: ZH-CN;">small size </span><span style="color: black; font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 10pt; mso-themecolor: text1;">stocks </span><span style="color: black; font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 10pt; mso-themecolor: text1; mso-fareast-language: ZH-CN;">after an extremely low</span><span style="color: black; font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 10pt; mso-themecolor: text1;"> volume </span><span style="color: black; font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 10pt; mso-themecolor: text1; mso-fareast-language: ZH-CN;">shock, but this volum</span><span style="color: black; font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 10pt; mso-themecolor: text1;">e-liquidity premium totally disappears</span><span style="color: black; font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 10pt; mso-themecolor: text1; mso-fareast-language: ZH-CN;"> for stocks experiencing an extremely high </span><span style="color: black; font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 10pt; mso-themecolor: text1;">volume shock</span><span style="color: black; font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 10pt; mso-themecolor: text1; mso-fareast-language: ZH-CN;">.</span><span style="color: black; font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 10pt; mso-themecolor: text1;"> </span></p><span style="font-family: Times New Roman; font-size: small;"> </span>

Hot and Cold Strategies: Australian Evidence

2011 ◽  
Vol 14 (02) ◽  
pp. 271-295 ◽  
Author(s):  
Vikash Ramiah ◽  
Tafadzwa Mugwagwa ◽  
Tony Naughton
Keyword(s):  
Stock Returns ◽  
Asset Allocation ◽  
High Frequency ◽  
Trading Volume ◽  
Stock Exchange ◽  
Short Selling ◽  
Investment Strategies ◽  
Tactical Asset Allocation ◽  
Momentum Trading ◽  
The Relationship

The main purpose of this paper is to explore a high-frequency tactical asset allocation strategy. In particular, we investigate the profitability of momentum trading and contrarian investment strategies for equities listed on the Australian Stock Exchange (ASX). In these two strategies we take into consideration the short-selling restrictions imposed by the ASX on the stocks used. Within our sample portfolios we look at the relationship between stock returns and past trading volume for these equities. This research also investigates the seasonal aspects of contrarian portfolios and observes weekly, monthly and yearly effects. We report significant contrarian profits for the period investigated (from 2001 to 2006) and show that contrarian profit is a persistent feature for the strategies examined. We also document that contrarian portfolios earn returns as high as 6.54% per day for portfolios with no short-selling restrictions, and 4.71% in the restricted model. The results also support the view that volume traded affects stock returns, and show that market imperfections such as short-selling restrictions affect investors' returns.

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