The Death of the Overreaction Anomaly? A Multifactor Explanation of Contrarian Returns

Are the returns accruing to De Bondt and Thaler’s (1985) (DT) much celebrated overreaction anomaly pervasive? Using the CRSP data set used by for the period 1926 through 1982, and, for the first time, an additional two decades of data (1983 through 2003), we provide preliminary support for the original work of DT, reporting that the overreaction anomaly has not only persisted over the past twenty years but has increased, on a risk-unadjusted basis. However, using the three factor model of Fama and French (1993) (FF), we find no statistically significant alpha can be garnered via the overreaction anomaly, with contrarian returns driven by the factors of size and value, not the behavioral biases of investors. It is our conjecture that the anomaly is not robust under the FF framework, with ‘contrarian’ investors following such a scheme simply compensated for the inherent portfolio risk held.Overreaction, anomaly, multifactor asset pricing model

The death of the overreaction anomaly? A multifactor explanation of contrarian returns

Are the returns accruing to De Bondt and Thaler's (1985) (DT) much celebrated overreaction anomaly pervasive? Using the CRSP data set used by DT for the period of 1926 through 1982, and additional two decades of data (1983 through 2003), we provide preliminary support for the original work of DT, reporting that the overreaction anomaly has not only persisted over the past twenty years but has increased when risk is unaccounted for. However, using the three-factor model of Fama and French (1993) (FF), we find no statistically significant alpha can be garnered via the overreaction anomaly, with contrarian returns seeming driven by the factors of size and value, not the hypothesized behavioral biases of investors. It is our conjecture that the anomaly is not robust under the FF framework, with 'contrarian' investors following such a scheme simply compensated for the inherent portfolio risk held.</p

Epstein-Barr virus:more than 50 years old and still providing surprises

It is more than 50 years since the Epstein–Barr virus (EBV), the first human tumour virus, was discovered. EBV has subsequently been found to be associated with a diverse range of tumours of both lymphoid and epithelial origin. Progress in the molecular analysis of EBV has revealed fundamental mechanisms of more general relevance to the oncogenic process. This Timeline article highlights key milestones in the 50-year history of EBV and discusses how this virus provides a paradigm for exploiting insights at the molecular level in the diagnosis, treatment and prevention of cancer