Investor Sentiment and the Performance of Mutual Funds Pursuing Momentum and Contrarian Trading Strategies

The success of mutual funds engaging in momentum and contrarian trading strategies is predicated on the identification of mispriced stocks. Stock investor sentiment betas capture salient characteristics that predispose stocks to mispricing. Funds engage in momentum and contrarian trading in equal proportions, but differ in the sentiment betas of the stocks in their portfolios. Momentum funds hold stocks with higher sentiment betas, and with a wider spread of betas compared to contrarian funds. Fund excess returns are strongly related to Baker and Wurgler’s (2007) change in sentiment index, and the mean and spread of the sentiment betas of their stocks

Investor sentiment and momentum and contrarian trading strategies: Mutual fund evidence

Stocks with high sentiment betas are more sensitive to investor sentiment, with more subjective valuations. We contend that sentiment beta also captures the duration of mispricing. Accordingly, stocks with high (low) sentiment betas provide opportunities for momentum (contrarian) traders. We form hypothetical zero investment portfolios of high (low) sentiment betas stocks, and show that momentum profits decompose to reveal positive (negative) serial correlation of idiosyncratic returns, that contribute to momentum (contrarian) profits. Furthermore, actual mutual funds identified as momentum (contrarian) traders hold stocks with higher (lower) sentiment betas. Additionally, funds adjust sentiment betas to enhance performance as sentiment changes

Mutual Fund Trades: Timing Sentiment and Managing Tracking Error Variance

We use portfolio holdings to show that mutual funds preferentially trade stocks according to the stocks‟ sentiment betas. Stocks with high sentiment betas are more responsive to investor sentiment and increase (decrease) in value as sentiment increases (decreases). Sentiment-based trades may be motivated by the opportunity to increase fund returns through timing predictability in sentiment, or by management of portfolio risk. Sentiment is mean-reverting, but its level and recent change only partially explain these trades. In contrast, 30 percent of sentiment-based trades are explained by the initial sentiment beta of funds that trade to reduce their tracking error variance

Mutual fund risk: Mean reversion or gaming?

The issue of whether mutual fund managers behave as though they are competing in a tournament has been the focus of several recent studies. Tournament behavior may be influenced by managers’ interim relative performance and whether they adjust their fund’s risk by their trades to win the tournament, improve their ranking, or prevent deterioration in their present ranking. It is an empirical issue as to whether a change in intertemporal risk is intentional or simply arises from risk mean reversion. Our methodology differentiates funds that actively trade to change risk from those whose risk is changed by trades with alternative motivations. Funds that are statistically identified as trading to change return variance or tracking error variance do not exhibit risk mean reversion. Rather, funds more commonly trade to reduce tracking error variance, particularly those with already low tracking error variances. We find weak evidence that underperforming funds intentionally trade to reduce return variance, and that trades designed to change tracking error variance are not associated with prior performance

Systematic risk and the performance of mutual funds pursuing momentum and contrarian trades

We examine mutual fund trading activity to determine whether they rebalance their portfolios towards stocks that were recent superior performers (a momentum strategy) or towards stocks that recently underperformed (a contrarian strategy). Using 2,829 funds with 49,661 fund-periods between 1991 and 2005, we find that around 15% of the funds exhibit contrarian trading behavior with a similar percentage following a momentum strategy. We highlight the importance of a stock’s risk to traders adopting momentum and contrarian strategies. Mutual funds that follow a momentum strategy and acquire high-risk stocks improve their performance, while those following a contrarian strategy in these stocks diminish their performance. Both contrarian and momentum trading behavior by funds persists

Cerebellar potentiation and learning a whisker-based object localization task with a time response window

Whisker-based object localization requires activation and plasticity of somatosensory and motor cortex. These parts of the cerebral cortex receive strong projections from the cerebellum via the thalamus, but it is unclear whether and to what extent cerebellar processing may contribute to such a sensorimotor task. Here, we subjected knock-out mice, which suffer from impaired intrinsic plasticity in their Purkinje cells and long-term potentiation at their parallel fiber-to-Purkinje cell synapses (L7-PP2B), to an object localization task with a time response window (RW). Water-deprived animals had to learn to localize an object with their whiskers, and based upon this location they were trained to lick within a particular period ("go" trial) or refrain from licking ("no-go" trial). L7-PP2B mice were not ataxic and showed proper basic motor performance during whisking and licking, but were severely impaired in learning this task compared with wild-type littermates. Significantly fewer L7-PP2B mice were able to learn the task at long RWs. Those L7-PP2B mice that eventually learned the task made unstable progress, were significantly slower in learning, and showed deficiencies in temporal tuning. These differences became greater as theRWbecame narrower. Trained wild-type mice, but not L7-PP2B mice, showed a net increase in simple spikes and complex spikes of their Purkinje cells during the task. We conclude that cerebellar processing, and potentiation in particular, can contribute to learning a whisker-based object localization task when timing is relevant. This study points toward a relevant role of cerebellum- cerebrum interaction in a sophisticated cognitive task requiring strict temporal processing

Probing Sub-Micron Forces by Interferometry of Bose-Einstein Condensed Atoms

We propose a technique, using interferometry of Bose-Einstein condensed alkali atoms, for the detection of sub-micron-range forces. It may extend present searches at 1 micron by 6 to 9 orders of magnitude, deep into the theoretically interesting regime of 1000 times gravity. We give several examples of both four-dimensional particles (moduli), as well as higher-dimensional particles -- vectors and scalars in a large bulk-- that could mediate forces accessible by this technique.Comment: 32 pages, 5 figures, RevTeX4, expanded discussion of interactions, references added, to appear in PR

Stripes and holes in a two-dimensional model of spinless fermions and hardcore bosons

We consider a Hubbard-like model of strongly-interacting spinless fermions and hardcore bosons on a square lattice, such that nearest neighbor occupation is forbidden. Stripes (lines of holes across the lattice forming antiphase walls between ordered domains) are a favorable way to dope this system below half-filling. The problem of a single stripe can be mapped to a spin-1/2 chain, which allows understanding of its elementary excitations and calculation of the stripe's effective mass for transverse vibrations. Using Lanczos exact diagonalization, we investigate the excitation gap and dispersion of a hole on a stripe, and the interaction of two holes. We also study the interaction of two, three, and four stripes, finding that they repel, and the interaction energy decays with stripe separation as if they are hardcore particles moving in one (transverse) direction. To determine the stability of an array of stripes against phase separation into particle-rich phase and hole-rich liquid, we evaluate the liquid's equation of state, finding the stripe-array is not stable for bosons but is possibly stable for fermions.Comment: 24 pages, 18 figure

Cost effectiveness of a 1-hour high-sensitivity troponin-T protocol: an analysis of the RAPID-TnT trial

Background: To understand the economic impact of an accelerated 0/1-hour high-sensitivity troponin-T (hs-cTnT) protocol. Objective: To conduct a patient-level economic analysis of the RAPID-TnT randomised trial in patients presenting with suspected acute coronary syndrome (ACS). Methods: An economic evaluation was conducted with 3265 patients randomised to either the 0/1-hour hs-cTnT protocol (n = 1634) or the conventional 0/3-hour standard-of-care protocol (n = 1631) with costs reported in Australian dollars. The primary clinical outcome was all-cause mortality or new/recurrent myocardial infarction. Results: Over 12-months, mean per patient costs were numerically higher in the 0/1-hour arm compared to the conventional 0/3-hour arm (by $472.49/patient, 95$-1,380.15 to $2,325.13, P = 0.617) with no statistically significant difference in primary outcome (0/1-hour: 62/1634 [3.8$891.22/patient, 95 %CI: $-96.07 to 1,878.50, P = 0.077). Restricting the analysis to patients with hs-cTnT concentrations ≤ 29 ng/L, mean per patient cost remained numerically higher in the 0/1-hour arm (by$152.44/patient, 95 %CI:$-1,793.11 to$2,097.99, P = 0.988), whilst the reduction in ED LOS was more pronounced (by 0.70 h/patient, 95 %CI: 0.45–0.95, P < 0.001). Conclusions: There were no differences in resource utilization between the 0/1-hour hs-cTnT protocol versus the conventional 0/3-hour protocol for the assessment of suspected ACS, despite improved initial ED efficiency. Further refinements in strategies to improve clinical outcomes and subsequent management efficiency are needed.Ming-yu Anthony Chuang Emmanuel S. Gnanamanickam, Jonathan Karnon, Kristina Lambrakis, Matthew Horsfall, Andrew Blyth ... et al

Quasiperiodic rhythms of the inferior olive

Inferior olivary activity causes both short-term and long-term changes in cerebellar output underlying motor performance and motor learning. Many of its neurons engage in coherent subthreshold oscillations and are extensively coupled via gap junctions. Studies in reduced preparations suggest that these properties promote rhythmic, synchronized output. However, the interaction of these properties with torrential synaptic inputs in awake behaving animals is not well understood. Here we combine electrophysiological recordings in awake mice with a realistic tissue-scale computational model of the inferior olive to study the relative impact of intrinsic and extrinsic mechanisms governing its activity. Our data and model suggest that if subthreshold oscillations are present in the awake state, the period of these oscillations will be transient and variable. Accordingly, by using different temporal patterns of sensory stimulation, we found that complex spike rhythmicity was readily evoked but limited to short intervals of no more than a few hundred milliseconds and that the periodicity of this rhythmic activity was not fixed but dynamically related to the synaptic input to the inferior olive as well as to motor output. In contrast, in the long-term, the average olivary spiking activity was not affected by the strength and duration of the sensory stimulation, while the level of gap junctional coupling determined the stiffness of the rhythmic activity i