A Comparative Study on the Herd Behavior of Chinese Equity and Partial Equity Hybrid Funds-Empirical Analysis Based on Market Fluctuations

This paper uses the LSV model and the VOL volatility index, as well as the quarterly position data of equity funds and partial equity hybrid funds from the first quarter of 2007 to the fourth quarter of 2019 to conduct an empirical study on the herd behavior of both kinds of funds. Then establish a connection with the volatility of the Shanghai Stock Exchange over the same period. The results show that the overall trend of herd behavior between equity funds and partial equity hybrid funds is almost completely opposite. Equity funds have a stronger herd behavior in buying, while partial equity hybrid funds have a stronger herd behavior in selling. Meanwhile, when the volatility of the Shanghai Composite Index increased significantly, the herd behavior in selling both increased

Time-varying risk aversion and the profitability of momentum trades

We show that time-varying risk aversion serves as a significant predictor of stock market momentum in the U.S. and globally. Risk aversion is found to be a robust predictor of momentum returns even after controlling for various well established stock market predictors and absorbs the predictive power of market volatility. The findings imply that momentum strategies can be enhanced by conditioning trades on the degree of risk aversion in the marketplace

Fundamental information in technical trading strategies

Technical trading strategies assume that past changes in prices help predict future changes. This makes sense if the past price trend reflects fundamental information that has not yet been fully incorporated in the current price. However, if the past price trend only reflects temporary pricing pressures, the technical trading strategy is doomed to fail. We demonstrate that this failure can be avoided by using financial statements as additional sources of information. We implement a trading strategy that invests in stocks with high past returns and high operating cash flows. This combination strategy yields a 3-factor alpha of 15% per year, which is much higher than that of the pure momentum strategy that invests in stocks with high past returns without considering operating cash flows. The combination strategy outperforms the momentum strategy in almost all years. The outperformance can be traced back to a higher probability of picking outperforming stocks. These are stocks that yield high future cash flows and hardly ever delist due to poor performance. The combination strategy is easily implemented: the information used is publicly available, the stocks chosen are liquid, and even high transaction costs do not erode the outperformance. --

Investment Decisions by Analysts: A Case Study of KSE

Security prices in efficient markets reflect all relevant information. Past price formations and even fundamental analysis cannot guarantee abnormal returns consistently to any pre-identified strategy or market participant, be they novice or expert traders. There have been various studies done in past to test market efficiency in emerging markets. However, in this study, we take the approach of surveying the professional investment community and study their stated actions in making investments. Our results indicate prevalence of herding and overconfidence in professional analysts. We also find that analysts extrapolate past into the future forecasts. We also find association between demographic characteristics and choice of security valuation methods that analysts use. In line with Chevalier & Ellison (1998), we find that young people herd less in our sample than the old people

Investment Decisions by Analysts: A Case Study of KSE

Security prices in efficient markets reflect all relevant information. Past price formations and even fundamental analysis cannot guarantee abnormal returns consistently to any pre-identified strategy or market participant, be they novice or expert traders. There have been various studies done in past to test market efficiency in emerging markets. However, in this study, we take the approach of surveying the professional investment community and study their stated actions in making investments. Our results indicate prevalence of herding and overconfidence in professional analysts. We also find that analysts extrapolate past into the future forecasts. We also find association between demographic characteristics and choice of security valuation methods that analysts use. In line with Chevalier & Ellison (1998), we find that young people herd less in our sample than the old people

Market response to investor sentiment

Recent empirical research suggests that measures of investor sentiment have predictive power for future stock returns over the intermediate and long term. Given the widespread publication of sentiment indicators, smart investors should trade on the information conveyed by such indicators and thus trigger an immediate market response to their publication. The present paper is the first to empirically analyze whether an immediate response can be identified from the data. We use survey-based sentiment indicators from two countries (Germany and the US). Consistent with previous research we find there is predictability at intermediate time horizons. For the US, however, the predictability disappears after 1994. Using event study methodology we find that the publication of sentiment indicators affects market returns. The sign of the immediate response is the same as that of the predictability over the intermediate term. This finding is consistent with the idea that sentiment is related to mispricing, but is inconsistent with the idea that the sentiment indicator provides information about future expected returns. --Investor Sentiment,Event Study,Return Predictability

Sooner or later: delays in trade reporting by corporate insiders

Until October 2004 corporate insiders in Germany were required to report trades in the shares of their firm 'without delay'. In practice substantial reporting delays were common. We show that the delays are systematically related to the characteristics of the firm. Delays are longer in widely-held firms and in firms using German accounting standards. This suggests that managers of these firms are less responsive to the informational requirements of the capital market. We further find that abnormal returns after the reporting date of an insider trade are independent of the reporting delay. This implies that prices are distorted in the period between the trading and the reporting date. This is a strong point in favor of regulation requiring and enforcing immediate disclosure of insider trades. --insider trading,directors' dealings,accounting standards

Investment behavior of analysts: A case study of Pakistan stock exchange

Security prices in efficient markets reflect all relevant information. Past price formations and even fundamental analysis cannot guarantee abnormal returns consistently to any pre-identified strategy or market participant, be they novice or expert traders. There have been various studies conducted with the aim to test market efficiency in emerging markets. However, in this study, we have surveyed the professional investment community and have studied their stated actions in making investments. Our results indicate the prevalence of herding and overconfidence in professional analysts. We also found that analysts extrapolate the past into future forecasts. We also discovered an association between demographic characteristics and the choice of security valuation methods that the analysts use. In line with Chevalier and Ellison (1998), we found that younger analysts herd less than the older ones