Short Returns Research Articles

Abnormal Returns to Artificial Intelligence Patent Infringement Litigations

ABSTRACT Artificial intelligence (AI) has become an important driver of economic growth and innovation. With rapid advances in AI, firms have a strategic opportunity to re-envision the cognitive reapportionment of tasks between humans, AI, and non-AI technologies. In doing so, firms can transform and dramatically elevate value creation through their business models, processes, and market offerings. We focus on a key risk, patent infringement litigation (PIL), that can adversely impact a firm’s value creation with AI. We posit and demonstrate that firms facing AI-PILs would have more negative short term abnormal returns compared to firms facing non-AI PILs. We further suggest that the abnormal returns are moderated by the types of plaintiffs and AI patents in which the abnormal returns are more negative when the plaintiffs are non-practicing entities (versus practicing entities) and when the AI patents at suit concern expertise-driven (versus data-driven) AI. Exploring the moderators jointly, we find evidence that for data-driven AI patents, the negative abnormal returns are stronger when the plaintiffs are practicing entities, but for expertise-driven AI patents, the negative abnormal returns are stronger when the plaintiffs are non-practicing entities.

Clustering Sukuk Using the K-Means Algorithm for Allocation of Investors Based on Investment Risk Profile

The number of capital market investors has increased by 33.53% from 7,489,337 at the end of 2021 to 10,000,628 on 3 November 2022. One of the most popular Islamic capital markets today is sukuk with high yields, lower taxes and short returns. Investors consider four main factors that affect the issuance of sukuk, namely the type of sharia contract, yield, effective term, and nominal value of the sukuk. Investors will find it very difficult to decide on their investment because they will face a lot of data and variables. The solution to this problem can be done by perform multivariate analysis by grouping sukuk based on the investor’s risk profile, namely defensive, conservative, balanced, moderately aggressive, aggressive using the KMeans machine learning compile with phyton. Sukuk data used are from Financial Services Authority (OJK) and PT Kustodian Sentral Efek Indonesia (KSEI). From the results, 3 clusters were obtained cluster 1 (65 sukuk), cluster 2 (68 sukuk) and cluster 3 (20 sukuk). The results investor risk profile classifications are the defensive and conservative types investor can invest in cluster 3, the balanced type investor can invest in cluster 2, the moderately aggressive and aggressive investor can invest in cluster 1.

The After Market Performance Analysis of Initial Public Offering in Bangladesh: Short Run and Long Run

This article investigates both short and long run performance of 113 IPOs listed on Dhaka Stock Exchange between 2008 and 2019. It examines short run performance to validate the anomaly of short run abnormal returns of stocks. The IPO stocks in the secondary market have underperformed in the three-year long run period and outperformed in the short run. The portfolio of IPO stocks has surpassed the DSEX by 1.17 percent in the short run and underperformed by -26.53 percent in the long run. Apart from these, the variation in the returns of sectors has also been analysed. Even though the overall portfolio underperformed, some sectors have outrun the index by a large margin. Insurance and telecommunication are among the outperforming sectors. Food & allied, Ceramic and Paper & print sectors have always underperformed the market severely. The core reasons behind these anomalies have not been researched in this study, further analysis can be done on this aspect. Variations in the sector-wise returns can also be identified by further investigation.

The SEC’s Short-Sale Experiment: Evidence on Causal Channels and Reassessment of Indirect Effects

During 2005–2007, the Securities and Exchange Commission conducted a randomized trial in which it removed short-sale restrictions from one third of the Russell 3000 firms. Early studies found modest market microstructure effects of removing the restrictions but no effect on short interest, stock returns, volatility, or price efficiency. More recently, many studies have attributed a wide range of indirect outcomes to this experiment, mostly without assessing the causal channels for those outcomes. We examine the three most often cited causal channels for these indirect effects: short interest, returns, and managerial fear. We find no evidence to support these channels. We then reexamine the principal findings in four recent studies using a sample that closely matches the actual experiment and a common research design and find minimal support for the reported indirect effects. Our findings highlight the importance of confirming a causal channel or an economic mechanism and show that sample selection and specification choices can produce statistical significance even without an underlying economic mechanism. This paper was accepted by David Sraer, finance. Supplemental Material: The internet appendix and data are available at https://doi.org/10.1287/mnsc.2023.4918 .

Private Placement, Investor Sentiment, and Stock Price Anomaly

The private placement of A-shares gained momentum with the release of the Administrative Measures for Securities Issuance of Listed Companies in 2006. This led to enhanced research on the impact of private placement on stock prices. In 2012, the Chinese government relaxed the requirements for directed issuance of listed companies, resulting in a surge of directed issuance since then. This study uses a sample of listed companies that conducted private placements in the A-share market between 2013 and 2021, to analyze the impact of investor sentiment on stock price differences after private placements from the perspective of short and long-term excess returns. This study constructs the non-main investor sentiment of individual stocks using high-frequency tick data of individual stocks and explores the relationship between this stock price anomaly and investor sentiment using multiple regression analysis. The results show a positive short-term announcement effect of A-share private placements, with the excess return rate occurring mainly before the plan announcement date. The stock price difference from the plan announcement date to ten trading days thereafter has a significantly negative relationship with the excess return rate. Furthermore, investor sentiment in private placements may negatively affect long-term stock performance. This study suggests that this phenomenon is caused by higher investor sentiment pushing stock prices upward in the short term, causing them to deviate from fundamentals, creating mispricing, and then driving them back to fundamentals, with information disclosure. After controlling for the severity of information disclosure, the effect of investor sentiment on long-term stock price performance becomes insignificant.

When and Why Cats Are Returned to Shelters.

There is considerable research on why cats are initially relinquished to shelters, but much less attention has been given to returns, despite the significant implications for shelter capacity and cat welfare. Furthermore, the structure of many databases fails to account for cats who are returned beyond 30 days, despite this making up a substantial portion of returns. In the current study, we examined common risk factors and reasons for return in a population of 2642 shelter cats. We found that cats who were older at the time of adoption or had a bite history had an increased risk of return, whereas cats that were in foster care prior to adoption had a decreased risk of return. We divided the returns by the time to return (<30 days: short term, >30 days: long term) to examine whether time to return had an impact. Approximately half the cats were returned in the short term. Cats were more likely to be returned for reasons, such as behavior, unwanted, and other pet in the short term and personal reasons, cost, euthanasia, and stray in the long-term return. Strategies to reduce returns should consider different solutions for short and long returns to maximize effectiveness.

An Analysis of Cyber Breaches and Effects on Shareholder Wealth

Cyber data breaches are an evolving risk facing all firms and threatens their ability to conduct business activity. Due to a lack of available information, very little is known about the frequency and severity of data breaches and the financial markets’ responses to them. This study uses a unique proprietary data set that includes cyber data breach information for 3,992 publicly traded firms during the 1990 to 2019 period. We find cyber breaches vary with time and cyber criminals focus on particular industries, types of information, access sources, and countries. We find significant short run negative abnormal returns around the announcement of cyber events and larger negative returns in industries with higher frequencies of attacks and attacks involving personal financial information. Additionally, we find increasing negative cumulative abnormal returns up to 250 days after the announcement.

The world of anomalies: Smaller than we think?

I examine a large set of 124 cross-sectional anomalies in international equity markets. Many of the significant U.S. anomalies replicate in equal-weighted portfolios. However, international equal-weighted portfolios are dominated by microcaps with very limited investment capacity. Only few anomalies survive when mitigating the impact of tiny stocks, accounting for multiple testing, and using factor models to adjust for expected returns. Accounting for the former two, only 15 anomalies yield significant long–short returns in the ex-U.S. world cross-section. Across regions, value anomalies are strongest. In all international markets, except for Asia Pacific, the best U.S. factor models help to further shrink the cross-sections significantly.

Did Retail Investors Bull the Market?

Retail investors have been viewed as noise traders by academics for decades. This article provides a fresh perspective on the effect of an increasing number of new retail investors joining the stock market on asset prices at the market level. By applying the empirical framework for post-earnings-announcement drift, we construct a detrend retail investor participation measure using the residual orthogonalization method. This analysis results in new evidence that when retail brokerage accounts increase after earnings announcements, it creates a boost in short term cumulative abnormal returns (CARs). If the past stock market does not have a persistence price pattern, an increase in the number of retail brokerage accounts following such an anti-persistence market does not impact CARs. Further, we find that the effect of excess retail accounts on CARs is statistically significant for the positive earnings news group of stocks.

Shorting costs and profitability of long–short strategies

AbstractWe examine how the profitability of long–short arbitrage strategies based on anomalies is affected after adjustment for two shorting costs: implicit cost due to unavailability of stocks in the short‐leg to sell short and loan fees actually paid to stock lenders. The combined shorting cost amounts to almost 40 percent of long–short gross returns over the sample period from January 2006 to December 2017. After adjustment for these shorting costs, long–short arbitrage profits are thus reduced by almost 40 percent. Even after adjustment for risk, the proportion of shorting costs is also substantial. If other trade‐related transaction costs are considered, long–short arbitrage profits would be reduced further. Our results provide explicit evidence that casts doubt on the profitability of long‐short arbitrage strategies based on anomalies.

Economic Evaluation of Gold Nanoparticle (AuNP) Production Using Laser Ablation Synthesis Method

Gold nanoparticles are very useful in various fields such as photoacoustic imaging microscopy, biotechnology, optoelectronics, and biomedicine. So the production of gold nanoparticle synthesis needs to be developed to an industrial scale. The purpose of this study is to determine the feasibility of the gold nanoparticle synthesis project using the laser ablation method on large-scale based on economic aspects. Several economic evaluation parameters are analyzed to inform the potential production of AuNP, such as GPM (Gross Profit Margin), BEP (Break-Even Point), CNPV (Cumulative Net Present Value), PBP (Payback Period), and PI (Profitability Index). The results showed that the production of AuNP nanoparticles was so prospective. Technical analysis to produce 100 g of AuNP nanoparticles per day shows the total cost incurred by the production process is 2,323,180 USD per year. PBP analysis show that investment will be profitable after more than 2.2 years. This project can compete with PBP capital market standards because of the short investment returns. To ensure the feasibility of a project, the project is estimated from ideal conditions to the worst case in production, including labor, sales, raw materials, utilities, and external conditions.

Short Selling Activity and Future Returns: Evidence from FinTech Data

We use a novel dataset from a leading FinTech company (S3 Partners) to study the ability of short interest to predict the cross-section of U.S. stock returns. We find that short interest (i.e. the quantity of shares shorted expressed as the fraction of shares outstanding) is a bearish indicator, consistent with theoretical predictions and with the intuition that short sellers are informed traders. The hedged portfolio long (short) in the top (bottom) short-interest decile generates an annual 4-Factor Fama-French alfa of -7.6% when weighting stocks equally and of -6.24% when weighting stocks based on market capitalization. Conditioning on past returns improves the predictive accuracy of short interest: the hedged short-interest portfolio that only uses stocks that appreciated the most in the past six months generates an alfa of -17.88%. Multivariate regressions that control for other known drivers of stock returns (e.g. size, value and liquidity) confirm the validity of these findings. In both Fama-MacBeth and Panel regressions we find that a one standard deviation increase in short interest predicts a drop in future adjusted returns of between 4.3% and 9.3%.

Robust Conditional Variance Estimation and Value-at-Risk

A common approach to estimating the conditional volatility of short horizon asset returns is to use an exponentially weighted moving average (EWMA) of squared past returns. The EWMA estimator is based on the maximum likelihood estimator of the variance of the normal distribution, and is thus optimal when returns are conditionally normal. However, there is ample evidence that the conditional distribution of short horizon financial asset returns is leptokurtic, and so the EWMA estimator will generally be inefficient in the sense that it will attach too much weight to extreme returns. In this paper, we propose an alternative EWMA estimator that is robust to leptokurtosis in the conditional distribution of portfolio returns. The estimator is based on the maximum likelihood estimator of the standard deviation of the Laplace distribution, and is a function of an exponentially weighted moving average of the absolute value of past returns, rather than their squares. We employ the robust EWMA estimator to forecast the VaR of aggregate equity portfolios for the US, the UK and Japan using historical simulation. We find that the robust EWMA estimator offers an improvement over the standard EWMA estimator. In particular, the VaR forecasts that it generates are as accurate as those generated by the standard EWMA estimator, but are more efficient in the sense that the average level of capital required to cover against unexpected losses is lower and the root mean square deviation between the VaR forecast and actual returns is smaller. Moreover, the volatility of the VaR forecast itself is substantially lower with the robust EWMA estimator than with the standard EWMA estimator, reflecting its lower sensitivity to extreme returns.

Finite Sample Analysis of Predictive Regressions with Long-Horizon Returns

In this paper, we provide an exact finite sample analysis of predictive regressions with overlapping long-horizon returns. This analysis allows us to evaluate the reliability of various asymptotic theories for predictive regressions in finite samples. In addition, our finite sample analysis sheds lights on the long outstanding question of whether a predictive regression with short or long-horizon returns is more powerful in detecting return predictability. Finally, we provide a simple bias-adjusted estimator of the slope coefficient as well as its estimated standard error for predictive regression with long-horizon returns. The resulting t-ratio of our bias-adjusted estimator has excellent size properties and dominates existing alternatives in the literature.

Halka Açılmada Sermaye Artırımı Yoluyla Satışa Hazır Bekletilen Payların Satışının Pay Getirilerine Etkileri

Bu çalışmanın amacı, ilk halka arz sonrasında sermaye artırımı yoluyla satışa hazır bekletilen payların satışının pay getirileri üzerindeki etkilerinin araştırılmasıdır. Çalışmanın kapsamını 2013-2020 yılları arasında satışa hazır bekletilen pay satışı yapan BİST şirketleri oluşturmaktadır. Olay etüdü yönteminin kullanıldığı çalışmada, olay günü olarak satışa hazır bekletilen payların satış tarihi belirlenmiştir. Olay penceresi olarak ise olay gününden 5 gün öncesi ve sonrası (-/+5) incelenmiştir. Payların beklenen getirilerinin hesaplanmasında Sermaye Varlıklarını Fiyatlama Modeli (SVFM) kullanılmıştır. Sonuç olarak sermaye artırımı yoluyla satışa hazır bekletilen payların satışının pay getirilerini olumlu yönde etkilediği fakat bu uygulamayı takip ederek yatırımcıların büyük miktarlarda ve uzun süreli pozitif getiriler elde edemeyeceği, ancak kısa dönemli pozitif anormal getiri elde edebilmenin mümkün olduğu tespit edilmiştir. Ayrıca test edilen dönem ve şirketler açısından BİST pay piyasasının yarı güçlü formda etkin bir piyasa olmadığını yönünde bulgulara ulaşılmıştır.

The World of Anomalies: Smaller Than We Think?

I examine a large set of 132 cross-sectional anomalies in international equity markets. While many of the significant U.S. anomalies replicate in equally weighted portfolios, only few survive when mitigating the impact of tiny stocks, accounting for multiple testing, and using factor models to adjust for expected returns. Accounting for the former two, only 15 anomalies yield significant long--short returns in the ex-U.S. world cross-section. Most of these are value anomalies. Factor models hardly seem necessary for Japan and the Middle East. In other international markets, the best U.S. factor models help shrink the cross-sections further.

Do general elections affect fractal structure of stock market?

This study intends to investigate whether political election effect is one of the Malaysian stock market anomalies. The time-varying fractal structure of the Malaysian stock market is examined under the impact of three consecutive general election periods. According to the fractal market hypothesis, this self-similarity behaviour might be triggered by the interactions of market participants with different time horizon (short-, medium-or long-term) investments and their different ways interpreting market information. Under normal market conditions, these interactions (trading) among the market participants somehow created a financial market stability in term of market liquidity. However, the fractal structure is ruined when either one of the time horizon market participants dominating the markets. In other words, the market liquidity condition is vanished as trading become unbalance among the different time horizon market participants. In this specific study, we investigate the impact of three most recent general elections to the Malaysian stock market liquidity. First, an ARIMA autoregressive conditional heteroscedastic model is used to filter the possible short memory returns. After that, a rolling time-window method is utilised to examine the fractal structure of the stock market. The estimated Hurst parameter suggested that there is a tendency of fractal structure disruption before all the three elections in the Malaysian stock markets. Whether the stock market can reclaim back the fractal structure is very much depends on the political stability after the election.

Time‐series and cross‐sectional momentum in anomaly returns

AbstractWe find strong evidence of time‐series and cross‐sectional momentum in the long–short returns of a comprehensive sample of anomalies. Strategies that exploit such persistence deliver significant abnormal returns that are robust to the stock momentum effect, cannot be explained by traditional asset‐pricing models, and are more pronounced when arbitrage capital is scarcer or market liquidity is lower. Momentum in anomaly returns dissipates but does not reverse, in the long‐run. Our findings are consistent with limits‐to‐arbitrage and slow‐moving capital causing mispricing to persist. Supporting this explanation, we find that both the level and persistence of anomaly returns are positively related to idiosyncratic volatility.

Time to build and bond risk premia

This paper studies the impact of time to build on the term structure of interest rates in an otherwise standard (Cox et al., 1985a; Cox et al., 1985b, CIR) production economy. Due to time to build, production depends not only on the current business condition as in the original CIR, but also on past conditions over the production period. This causes equilibrium quantities, including the short rate, forward rates, and bond returns, to depend on the historical path of the production opportunities. Production delay that accumulates uncertainty over the time to build generates significant time variations in bond risk premia. Bond returns can be predicted by current forward rates, as well as their lagged values, since current market states not only affect the current short rate but also the short rate in a distant future. Due to the path dependence, risk premia cannot be fully spanned by current yields. We find evidence that time to build improves the ability of the CIR in generating empirical facts.

Financial Returns of Maize and Bean Production under Selected Tillage Practices in Semi-arid Area of Mwala Sub County, Kenya

An on-farm experiment was carried out to assess the short term financial returns over four cropping seasons of selected tillage practices and cropping systems in semi-arid Mwala Sub County of Kenya. The tillage treatments were Disc Ploughing (DP), Disc Ploughing and Harrowing (DPH), Ox-ploughing (OX), Subsoiling – Ripping (SSR), Hand hoeing with Tied Ridges (HTR), and Hand hoeing (H) only. There were three cropping systems of Sole Maize (SM), Sole Bean (SB), and Maize - Bean intercrop (M + B), which were investigated in a Split-Plot Design with four replications. Input and output prices were obtained from the local markets and used to compute the financial returns. Across the tillage practices, higher net returns were realized in DPH (USD 1165), DP (USD 1014), and SSR (USD 866). In the cropping systems, the intercrop (USD 1051) and sole bean (USD 954) reported higher benefits than sole maize (USD 692). Based on marginal analysis, it is economically viable to recommend the SSR with sole bean systems to farmers in Mwala Sub County as it produced the higher BCR (> 2) and an MRR (> 100 %) which is comfortable to most farmers.