Can Individual Investors Beat the Market?

We document strong persistence in the performance of trades of individual investors. Investors classified in the top 10 percent place other trades that on average earn excess returns of 15 basis points per day. A rolling-forward strategy of going long firms purchased by previously successful investors and shorting firms purchased by previously unsuccessful investors results in excess returns of 5 basis points per day. These returns are not confined to small stocks nor to stocks in which the investors are likely to have inside information. Our results suggest that skillful individual investors exploit market inefficiencies to earn abnormal profits, above and beyond any profits available from well-known strategies based upon size, value, or momentum.Individual Investors, Market Efficiency, Performance Persistence

Good Day Sunshine: Stock Returns and the Weather

Psychological evidence and casual intuition predict that sunny weather is associated with upbeat mood. This paper examines the relation between morning sunshine at a country's leading stock exchange and market index stock returns that day at 26 stock exchanges internationally from 1982- 97. Sunshine is strongly positively correlated with daily stock returns. After controlling for sunshine, other weather conditions such as rain and snow are unrelated to returns. If transactions costs are assumed to be minor, it is possible to trade profitably on the weather. These results are difficult to reconcile with fully rational price-setting.market efficiency, mood and securities prices, psychology and finance

Crisis and recovery in the wake of super-salient news: Who moves markets?

Abstract We compare reactions in the prices and trading patterns of common stocks and closed-end funds, which have substantially di¤erent investor clienteles, to the September 11, 2001 terrorist attacks. Even in assets with institutional buying, retail investor trading moved prices signi…cantly lower. Although greater salience has been shown to reduce underreaction to news, we conclude the extreme salience of this event resulted in overreaction. Subsequent reversals were substantially security-speci…c and therefore not due simply to improvement in general sentiment. Consistent with microstructure theory, the speed of reversals depended signi…cantly on the relative quality and availability of information about fundamental values. terrorist attacks. Even in assets with net institutional buying, retail investor trading moved prices signi…cantly lower. Although greater salience has been shown to reduce underreaction to news, we conclude the extreme salience of this event resulted in overreaction. Subsequent reversals were substantially security-speci…c and therefore not due simply to improvement in general sentiment. Consistent with microstructure theory, the speed of reversals depended signi…cantly on the relative quality and availability of information about fundamental values. JEL classi…cations: G12, G1

Dynamics of Alexandrium fundyense blooms and shellfish toxicity in the Nauset Marsh System of Cape Cod (Massachusetts, USA)

Author Posting. © The Author(s), 2011. This is the author's version of the work. It is posted here by permission of Elsevier B.V. for personal use, not for redistribution. The definitive version was published in Harmful Algae 12 (2011): 26–38, doi:10.1016/j.hal.2011.08.009.Paralytic Shellfish Poisoning (PSP) toxins are annually recurrent along the Massachusetts coastline (USA), which includes many small embayments and salt ponds. Among these is the Nauset Marsh System (NMS), which has a long history of PSP toxicity. Little is known, however, about the bloom dynamics of the causative organism Alexandrium fundyense within that economically and socially important system. The overall goal of this work was to characterize the distribution and dynamics of A. fundyense blooms within the NMS and adjacent coastal waters by documenting the distribution and abundance of resting cysts and vegetative cells. Cysts were found predominantly in three drowned kettle holes or salt ponds at the distal ends of the NMS - Salt Pond, Mill Pond, and Town Cove. The central region of the NMS had a much lower concentration of cysts. Two types of A. fundyense blooms were observed. One originated entirely within the estuary, seeded by cysts in the three seedbeds. These blooms developed independently of each other and of the A. fundyense population observed in adjacent coastal waters outside the NMS. The temporal development of the blooms was different in the three salt ponds, with initiation differing by as much as 30 days. These differences do not appear to reflect the initial cyst abundances in these locations, and may simply result from higher cell retention and higher nutrient concentrations in Mill Pond, the first site to bloom. Germination of cysts accounted for a small percentage of the peak cell densities in the ponds, so population size was influenced more by the factors affecting growth than by cyst abundance. Subsurface cell aggregation (surface avoidance) limited advection of the vegetative A. fundyense cells out of the salt ponds through the shallow inlet channels. Thus, the upper reaches of the NMS are at the greatest risk for PSP since the highest cyst abundances and cell concentrations were found there. After these localized blooms in the salt ponds peaked and declined, a second, late season bloom occurred within the central portions of the NMS. The timing of this second bloom relative to those within the salt ponds and the coastal circulation patterns at that time strongly suggest that those cells originated from a regional A. fundyense bloom in the Gulf of Maine, delivered to the central marsh from coastal waters outside the NMS through Nauset Inlet. These results will guide policy decisions about water quality as well as shellfish monitoring and utilization within the NMS and highlight the potential for “surgical” closures of shellfish during PSP events, leaving some areas open for harvesting while others are closed.This work was supported by NOAA Grant NA06OAR4170021, NPS Grant H238015504 and by the Woods Hole Center for Oceans and Human Health through NSF Grants OCE-0911031 and OCE-0430724 and NIEHS Grant 1P50-ES01274201. B.G.C. was supported by a Xunta de Galicia Ángeles Alvariño fellowship and the Stanley W. Watson Chair for Excellence in Oceanography under a Postdoctoral program at the Woods Hole Oceanographic Institution

Scope for Credit Risk Diversification

This paper considers a simple model of credit risk and derives the limit distribution of losses under different assumptions regarding the structure of systematic risk and the nature of exposure or firm heterogeneity. We derive fat-tailed correlated loss distributions arising from Gaussian risk factors and explore the potential for risk diversification. Where possible the results are generalised to non-Gaussian distributions. The theoretical results indicate that if the firm parameters are heterogeneous but come from a common distribution, for sufficiently large portfolios there is no scope for further risk reduction through active portfolio management. However, if the firm parameters come from different distributions, then further risk reduction is possible by changing the portfolio weights. In either case, neglecting parameter heterogeneity can lead to underestimation of expected losses. But, once expected losses are controlled for, neglecting parameter heterogeneity can lead to overestimation of risk, whether measured by unexpected loss or value-at-risk

Good day sunshine: Stock returns and the weather.

Abstract Psychological evidence and casual intuition predict that sunny weather is associated with upbeat mood. This paper examines the relation between morning sunshine at a country's leading stock exchange and market index stock returns that day at 26 stock exchanges internationally from 1982-97. Sunshine is strongly significantly correlated with daily stock returns. After controlling for sunshine, rain and snow are unrelated to returns. There were positive net-of-transaction costs profits to be made from substantial use of weather-based strategies, but the magnitude of the gains was fairly modest. These findings are difficult to reconcile with fully rational price-setting

A Wireless Embedded Tongue Tactile Biofeedback System for Balance Control

We describe the architecture of an original biofeedback system for balance improvement for fall prevention and present results of a feasibility study. The underlying principle of this biofeedback consists of providing supplementary information related to foot sole pressure distribution through a wireless embedded tongue-placed tactile output device. Twelve young healthy adults voluntarily participated in this experiment. They were asked to stand as immobile as possible with their eyes closed in two conditions of nobiofeedback and biofeedback. Centre of foot pressure (CoP) displacements were recorded using a force platform. Results showed reduced CoP displacements in the biofeedback relative to the no-biofeedback condition. On the whole, the present findings evidence the effectiveness of this system in improving postural control on young healthy adults. Further investigations are needed to strengthen the potential clinical value of this device.Comment: Pervasive and Mobile Computing (2008) in pres

The Role of Industry, Geography and Firm Heterogeneity in Credit Risk Diversification

In theory the potential for credit risk diversification for banks could be substantial. Portfolio diversification is driven broadly by two characteristics: the degree to which systematic risk factors are correlated with each other and the degree of dependence individual firms have to the different types of risk factors. We propose a model for exploring these dimensions of credit risk diversification: across industry sectors and across different countries or regions. We find that full firm-level parameter heterogeneity matters a great deal for capturing differences in simulated credit loss distributions. Imposing homogeneity results in overly skewed and fat-tailed loss distributions. These differences become more pronounced in the presence of systematic risk factor shocks: increased parameter heterogeneity greatly reduces shock sensitivity. Allowing for regional parameter heterogeneity seems to better approximate the loss distributions generated by the fully heterogeneous model than allowing just for industry heterogeneity. The regional model also exhibits less shock sensitivity

Mass Stranding of Marine Birds Caused by a Surfactant-Producing Red Tide

In November-December 2007 a widespread seabird mortality event occurred in Monterey Bay, California, USA, coincident with a massive red tide caused by the dinoflagellate Akashiwo sanguinea. Affected birds had a slimy yellow-green material on their feathers, which were saturated with water, and they were severely hypothermic. We determined that foam containing surfactant-like proteins, derived from organic matter of the red tide, coated their feathers and neutralized natural water repellency and insulation. No evidence of exposure to petroleum or other oils or biotoxins were found. This is the first documented case of its kind, but previous similar events may have gone undetected. The frequency and amplitude of red tides have increased in Monterey Bay since 2004, suggesting that impacts on wintering marine birds may continue or increase