Return Patterns Research Articles

Short-run Risk, Business Cycle, and the Value Premium

We jointly explain the variations of the equity and value premium in a model with both short-run (SRR) and long-run (LRR) consumption risk. In our preliminary empirical analysis, we find that SRR varies with the business cycle and it has a substantial predictive power for market excess returns and the value premium|both in-sample and out-of-sample. The LRR component also differs significantly from zero, and value stocks have a larger exposure to both LRR and SRR than growth stocks. To explain these patterns in asset returns, we propose an extended and analytically tractable LRR model.

Beyond the deportation regime: differential state interests and capacities in dealing with (non-) deportability in Europe

ABSTRACTThere is considerable variation in how countries deal with the presence of migrants lacking a legal right to stay. We present an analysis of the post-arrival migration enforcement regimes of European countries using a two-phased mixed-methods approach. The article (1) provides the currently best possible statistical overview of forced and assisted return in 12 European countries among rejected asylum seekers from six source countries, and (2) explores policy practices in six Western European and Scandinavian countries regarding deportability and effective non-deportability. While most rejected asylum seekers examined do not demonstrably return, we see highly divergent return patterns between host countries, and significant policy differences. The article thus shows the importance of better examining variation in post-arrival enforcement policies and their underlying interests and capacities. There is not one unified ‘deportation regime’; there are at least four ideal-typical ‘post-arrival enforcement regimes’: thin, thick, targeted, and hampered.

Analyzing seasonal anomalies for Israel: evidence from pre- and post-global financial crisis

PurposeThe purpose of this paper is to analyze different seasonal anomalies for the Israeli securities markets for the pre- and post-global financial crisis periods.Design/methodology/approachThe closing values of six indices of the Tel Aviv Stock Exchange (TASE) of Israel have been considered. The time frame ranges from 2000 to 2018. Further, the overall time frame has been segregated into pre- and post-financial crisis periods. The study employs dummy variable regression technique for assessing different calendar anomalies.FindingsThe results show evidence pertaining to different seasonal anomalies for the Israeli markets. The results specifically show that the anomalies change considerably across the pre- and post-financial crisis periods. The results are more apparent for three anomalies including the day of the week effect, the month of the year effect and the holiday effect. However, anomalies including the Halloween effect and the trading month effect are found to be insignificant across both pre- and post-financial crisis periods.Originality/valueThe study is first of its kind that analyzes different seasonal anomalies across pre- and post-financial crisis periods for the Israeli markets. The study provides newer insights about the overall return patterns observed in different indices of the TASE.

Styles through a convergent/divergent lens: the curious case of ESG

We look at a technique of classification, based on convergent and divergent patterns of returns that has been applied to hedge funds and alternative investments, and apply it to US equity investment styles with a particular interest in ESG. We extend the technique by looking at the impact of price changes on factor-mimicking portfolio weights. This analysis leads to powerful insights into style return dynamics. In particular, an ESG-ranked long-short portfolio looks more like momentum than value.

Conditional Volatility Targeting

We analyze the performance of volatility targeting strategies. Conventional volatility targeting fails to consistently improve performance in global equity markets and can lead to markedly greater draw-downs. Motivated by return patterns in different volatility states, we propose a conditional volatility targeting strategy that only adjusts risk exposures in the extremes during high and low volatility states. This strategy consistently enhances Sharpe ratios and reduces draw-downs and tail risks for major equity markets and momentum factors across regions, with low turnover and leverage. Conditional volatility management can also be applied to tactical allocation between multiple assets or risk factors.

Intraday Stock Returns Patterns Revisited. A Day of the Week and Market Trend Approach

In this paper, we investigate the intraday behavior of the General index of the Athens Stock Exchange. We find evidence for a U shape pattern for both returns and volatility. Returns are positive at the opening and closing phases of a trading session, with the pattern being more pronounced in specific days of the week. Subsequent analysis for bull and bear markets shows evidence of an upward and a downward return pattern, respectively.

Informed trading in government bond markets

Using comprehensive regulatory data, we examine trading by different investor types in government bond markets. Our sample covers virtually all secondary market trading in gilts and contains detailed information on each transaction, including the identities of both counterparties. We find that hedge funds’ daily trading positively forecasts gilt returns in the following one to five days, which is then fully reversed in the following month. A part of this short-term return predictability is due to hedge funds’ ability to anticipate future demand of other investors. Mutual fund trading also positively predicts gilt returns, but over a longer horizon of one to two months. This return pattern does not revert in the following year and is partly due to mutual funds’ ability to forecast changes in short-term interest rates.

Об исхождении божественных Лиц и Божественных энергиях

The concept of the divine energies (energeiai) is commonly associated with the late Byzantine theologian Gregory Palamas. In fact, however, it has biblical origins and figures prominently in Greek patristic theology from at least the fourth century. Here I briefly trace its history beginning with the Pauline usage of energeia and continuing through the Cappadocian Fathers, Dionysius the Areopagite, Maximus the Confessor, and Gregory Palamas. I argue that the divine processions in Dionysius function much as do the divine energies in the Cappadocians, although Dionysius enriches the concept by setting it within the context of a Neoplatonic pattern of procession and return. Dionysius’s own work was in need of a further synthesis in that he does not explain the relationship between the divine processions and the divine logoi, the “divine and good acts of will” by which God creates. Maximus the Confessor then introduced a further element into this complex tradition through his argument that certain “natural energies” must necessarily accompany any nature. I argue that the real importance of Palamas from the standpoint of the history of philosophy lies not in originating the concept of the divine energies, but in using it to synthesize these disparate elements from the Cappadocians, Dionysius, and Maximus.

Is There a Value Premium in Cryptoasset Markets?

This paper identifies active addresses-to-network value as an additional common risk factor in the returns on cryptoassets. Active addresses refer to the number of unique wallet addresses that conduct an on-chain transaction, whereas the network value of a cryptoasset corresponds to its market capitalization. Investigating 652 cryptoassets, I find that there are anomalous returns that increase with active addresses-to-network value ratio, a proxy for the value anomaly. Cryptoassets with a high active address to network value ratio yield on average 2.1 percentage points higher weekly returns compared to cryptoassets with low active addresses to network value ratio, and comparable size. A four-factor model directed at capturing the value pattern in average returns performs better than a three-factor model, including the market, size, and momentum factor. Importantly, the results suggest that cryptoasset prices are related to their fundamentals.

Credit Rating Downgrade Risk on Equity Returns

We develop a four-factor model intended to capture size, value, and credit rating transition patterns in excess returns for a panel of predominantly mid- and large-cap entities. Using credit transition matrices and rating histories from 48 US issuers, we provide evidence to support a statistically significant negative downgrade risk premium in excess returns, suggesting that stocks at higher risk of failure tend to deliver lower returns. The performance of the model remains robust across several estimation methods. Panel Granger causality test results indicate that there indeed is a Granger-causal relationship from credit rating transition probabilities to excess returns. Our paper thus provides a new methodology to generate firm-level downgrade probabilities and the basis for further empirical validation and development of Fama-French-type models under financial distress.

The Effect of Dividend Announcements on Stock Returns for Companies Listed on the Main Board of the Kuala Lumpur Stock Exchange

Stock market reactions to the announcements of final dividend increases, decreases and no changes are empirically analyzed in an emerging market environment. A standard event study methodology is adopted to examine the price reactions of 120 listed companies surrounding sixty days of the announcement dates. Although prior studies in developed countries postulate that dividend decreases are associated with negative abnormal returns, such a reaction was not found in the Malaysian capital market. The evidence nevertheless shows that dividend increases lead to positive abnormal returns, supporting the Information Content Hypothesis, Jensen :s Free Cash Flow Hypothesis and Agency Cost Theory. As for the no change dividend announcements, no clear pattern of cumulative average abnormal returns could be observed.

High School Majors, Comparative (Dis)Advantage, and Future Earnings

This paper studies whether specialized academic fields of study in secondary school (i.e., high school majors), which are common in many countries, affect earnings as an adult. Identification is challenging, because it requires not just quasi-random variation into majors, but also an accounting of individuals’ next-best alternatives. Our setting is Sweden, where at the end of ninth grade students rank fields of study and admission to oversubscribed fields is determined based on a student’s GPA. We use a regression discontinuity design which allows for different labor market returns for each combination of preferred versus next-best choice, together with nationwide register data for school cohorts from 1977-1991 linked to their earnings as adults. Our analysis yields several key results. First, Engineering, Natural Science, and Business yield higher earnings relative to most second-best choices, while Social Science and Humanities result in sizable drops, even relative to non-academic vocational programs. The magnitudes are often as large as the return to two years of additional education. Second, the return to completing a major varies substantially as a function of a student’s next-best alternative. Third, the pattern of returns for individuals with different first and second best choices is consistent with comparative advantage for many field choice combinations, while others exhibit comparative disadvantage or random sorting. Fourth, most of the differences in adult earnings can be attributed to differences in occupation, and to a lesser extent, college major. Taken together, these results highlight that the high school majors students choose at age 16, when they have limited information about their skills and the labor market, have sizable effects which persist into adulthood. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Patterns of return visits to the Emergency Department among adult patients: an experience from tertiary hospital

Patterns of return visits to the Emergency Department among adult patients: an experience from tertiary hospital

Economic Policy Uncertainty and Hedge Fund Returns

In this paper, we study if the risk associated with innovations in economic policy uncertainty (EPU), that is, EPU risk, is priced in the cross section of hedge fund returns. Based on decile portfolios sorted on the EPU beta, we show that EPU risk commands a significantly negative premium of -0.49% per month. Conventional risk factors cannot explain the return pattern associated with the spread in EPU betas, and our findings are robust to controls for share restrictions, exposure to other risks, and the illiquidity of assets under management and to the exclusion of financial crises. In addition, we show that 12.5% of hedge funds have EPU timing ability and that an investment strategy long in top-ranked EPU timing funds and short in bottom-ranked EPU timing funds delivers a significantly positive risk-adjusted return.

ESG Preference, Institutional Trading, and Stock Return Patterns

Socially responsible (SR) institutions tend to focus more on the ESG performance and less on quantitative signals of value. Consistent with this difference in focus, we find that SR institutions react less to quantitative mispricing signals. Our evidence suggests that the increased focus on ESG may have influenced stock return patterns. Specifically, abnormal returns associated with these mispricing signals are greater for stocks held more by SR institutions. The link between SR ownership and the efficacy of mispricing signals only emerges in recent years with the rise of ESG investing, and is significant only when there are arbitrage-related funding constraints.

Do Reference Prices Impact How Investors Respond to News?

We provide evidence that reference prices impact how investors respond to news. When current prices are farther from a reference price, investors react more strongly to news. We first document that individual investors are more (less) likely to sell a stock following bad (good) news when the stock's trading price is farther from the investor's purchase price. Motivated by this micro-level evidence, we construct a stock-level measure to capture the distance between a stock's trading price and its purchase price for the average investor. We provide evidence that this distance from purchase price produces a substantial amount of cross-sectional variation in the degree to which stocks over- or underreact to news. Stocks trading farthest from their purchase price react more strongly to news than stocks trading near their purchase price. Consistent with relative overreaction, stocks trading farthest from their purchase price also exhibit greater return reversals following news days. We document that a cross-sectional strategy exploiting these return patterns earns a monthly alpha of 0.93%. These findings are distinct from alternative explanations related to size, illiquidity, and volatility. Our evidence instead suggests that reference prices have a meaningful impact on how investors respond to news.

The Joint Distribution of Value and Profitability: International Evidence

We examine the joint distribution of value and profitability in international markets. Over the 1990-2020 sample period, portfolios formed at the intersection of value and profitability generate systematic return patterns: value and high-profitability portfolios substantially outperform growth and low- profitability portfolios. The return differences are present in developed markets (ex-US), emerging markets, subsets and combinations thereof (EAFE, ACWI ex-US), as well as in large and small stocks. When viewed in combination with similar such evidence from the US, the data suggest important benefits to targeting value and profitability jointly rather than piecemeal.

Mutual Funds-A Pragmatic Research on Investors Perception Towards Risk–Return Pattern with Special Reference to Coimbatore City

Mutual funds act as a medium for retail investors to invest their savings in the professional fund's management system, irrespective of the sum invested. The industry of mutual fund has come a long way in predicting the investor's sufficient growth of their thoughts of investing in such fund houses in large numbers. The basic drive of an investment to get a maximum return with a minimum risk where the mutual fund provides the opportunity for it. The research provides the statistical data analysis through the investor's perception of mutual funds, understanding about the growth and the riskreturn of the investors. The data has been analysed from mutual fund investors. It mainly focuses on the investor's point of view towards the mutual fund schemes which is predictable in the future rate of investment and the growth and risk factors involved. It was found that low risk funds and liquidity of funds scheme are having influence on the investor's perception for investing in the mutual fund.

Perma-dying Worlds and the Limit of Eternal Return in Digital Games

The article discusses the types of death in selected digital and tabletop games, sorting them into two groups: ones that follow the pattern of eternal return and allow the player to endlessly respawn in their worlds, and ones that limit the possibility of coming back. The article focuses on the latter, and analyses the mechanics limiting the access to the game – from permadeath, through the randomness and unique character of the events happening in online multiplayer games, up to permapermadeath – and the effects of the application of these mechanics.

The impact of age and sex on first-time donor return behavior.

This study examined the impact of age and sex of first-time donors who had not experienced an adverse event or deferral on their likelihood of and time to return. On behalf of the Biomedical Excellence for Safer Transfusion (BEST) Collaborative, international blood collection agencies (BCAs) were invited to provide data on first-time whole blood donors in 2014, including initial presentation date, collection site type, age, sex, blood type, return to donate within 24 months (yes/no), and subsequent presentation date. Eight BCAs contributed 706,789 records. The overall odds of returning to donate were slightly lower in female versus male donors, and the overall age trend was U-shaped with younger and older donors having higher odds for returning relative to middle-aged donors. However, variations by BCA were observed. Specifically, in three BCAs, women had higher odds of returning to donate than men. Further, while across seven BCAs the smallest cohort of older first-time donors returned at a higher rate and returned more quickly than middle-aged first-time donors, the behavior of younger donors varied substantially between BCAs. While older first-time donors are more likely to return and return more quickly than middle-aged donors they make up only a small proportion of first-time donors, whereas the larger group of younger donors exhibits less clear patterns of return compared to middle-aged donors. Further research is needed to determine whether targeting the recruitment of older donors or bolstering retention of middle-aged donors would be most effective in maintaining the blood supply.