Investment momentum:A two-dimensional behavioural strategy

We propose an investment-momentum strategy of buying past winners with low investment and selling past losers with high investment, which simultaneously exploits two dimensions of market inefficiencies. The new strategy generates twice the monthly returns earned by either the price momentum or investment strategy (1.44% vs. 0.75% or 0.61%). Despite the diminishing anomalies in recent decades, the investment-momentum stays persistent. The mispricing-based strategy performs better in periods of high investor sentiment or for stocks with high limits-to-arbitrage, which is consistent with our expectations. Overall, we show that one can simultaneously use multiple dimensions of market inefficiency to attain superior performance

Free Cash Flows and Price Momentum

This study investigates the role of free cash flows and (cross-sectional and time-series) price momentum in predicting future stock returns. Past returns and free cash flows each positively predict future stock returns after controlling for the other, suggesting that cash flows and momentum both contain valuable and distinctive information about future stock returns. A strategy of buying past winners with high free cash flows and shorting past losers with low free cash flows significantly outperforms the traditional momentum trading strategy. The enhanced performance is not sensitive to investor sentiment, time variations, or transaction costs. Further analysis shows that the incremental cash flow effects are largely attributable to net distributions to equity/debt holders. Overall, our findings shed light on the role of corporate fundamentals in technical trading strategies

Numerical study of vapor bubble effect on flow and heat transfer in microchannel

Flow boiling in a microchannel is characterized by nucleation and dynamic behavior of vapor bubbles in the channel. In the present study, the effect of vapor bubble on fluid flow and heat transfer in a microchannel is investigated via lattice Boltzmann (LB) modeling. With respect to boiling flow in a single microchannel, the bubble nucleation, growth, and departure are simulated by using an improved hybrid LB model. Relating bubble behavior with fluid flow and boiling heat transfer provides some insight into the relevant fundamental physics on flow boiling in the microchannel. It is found that the bubble growth before its departure from the wall induces an obvious resistance to the fluid flow. The processes of nucleation and motion of different bubbles interact, leading to an alternate, either enhanced or weakened, effect of bubble behavior on the flow boiling. (C) 2011 Elsevier Masson SAS. All rights reserved.</p

Do institutional investors process and act on information? : Evidence from M&A targets

We document important links between targets’ institutional ownership and takeover-bid outcomes. Firms’ institutional ownership increases the likelihood of receiving stock-for-stock bids. The impact becomes stronger when information asymmetries are higher, whereas we find little support for alternative channels, such as bidder misvaluation or target-side adverse selection. The information channel is further buttressed in our analyses of institutions’ share-retention decisions, targets’ demand for top-tier advisors, collar provisions, and targets’ share of expected synergies. Our findings suggest that institutions’ information advantage facilitates rational payment design and targets’ bargaining power gains, alleviating deadweight losses associated with stock-for-stock offers. (JEL G23, G32, G34