Do Short Sellers Anticipate Future Market Returns? International Evidence

2021 ◽  
Author(s):  
Arseny Gorbenko
Keyword(s):  
Future Market ◽  
Market Returns ◽  
Short Sellers ◽  
International Evidence

scholarly journals Opportunity or Crisis? Volatility and Leverage Effect in the World’s Largest Economies

2019 ◽  
Vol 9 (4) ◽  
pp. 1
Author(s):  
Amalendu Bhunia ◽  
Devrim Yaman
Keyword(s):  
Stock Market ◽  
Stock Markets ◽  
Market Volatility ◽  
Future Market ◽  
Market Returns ◽  
Stock Market Returns ◽  
The Us ◽  
The World ◽  
The Impact ◽  
The Relationship

This paper examines the relationship between asset volatility and leverage for the three largest economies (based on purchasing power parity) in the world; US, China, and India. Collectively, these economies represent Int$56,269 billion of economic power, making it important to understand the relationship among these economies that provide valuable investment opportunities for investors. We focus on a volatile period in economic history starting in 1997 when the Asian financial crisis began. Using autoregressive models, we find that Chinese stock markets have the highest volatility among the three stock markets while the US stock market has the highest average returns. The Chinese market is less efficient than the US and Indian stock markets since the impact of new information takes longer to be reflected in stock prices. Our results show that the unconditional correlation among these stock markets is significant and positive although the correlation values are low in magnitude. We also find that past market volatility is a good indicator of future market volatility in our sample. The results show that positive stock market returns result in lower volatility compared to negative stock market returns. These results demonstrate that the largest economies of the world are highly integrated and investors should consider volatility and leverage besides returns when investing in these countries.

A Fundamental-Analysis-Based Test for Speculative Prices

2011 ◽  
Vol 87 (1) ◽  
pp. 121-148 ◽  
Author(s):  
Asher Curtis
Keyword(s):  
Structural Change ◽  
Measurement Error ◽  
Positive Association ◽  
Data Availability ◽  
Future Market ◽  
Fundamental Analysis ◽  
Aggregate Level ◽  
Market Returns ◽  
Long Run ◽  
Price Movements

ABSTRACT I investigate the possibility that recent price movements include significantly larger speculative components than those observed historically, where speculation is defined as the component of price that does not co-move with fundamentals. Specifically, at the aggregate level, price and accounting fundamentals co-move historically (1979–1993) but do not co-move recently (1994–2008). The lack of co-movement in recent periods is accompanied by a significant reduction in the positive association between ratios of accounting fundamentals-to-price with future market returns. Changes in measurement error in accounting fundamentals do not appear to cause the lack of co-movement in recent periods, and risk- and growth-based explanations are not supported by the data. The results of this study provide evidence of a structural change in the long-run association between price and accounting fundamentals. Data Availability: Data are available from public sources identified in the study.

scholarly journals Individual Investors, Average Skewness, and Market Returns

2020 ◽  
Vol 12 (20) ◽  
pp. 8357
Author(s):  
Jungmu Kim ◽  
Yuen Jung Park
Keyword(s):  
Corporate Social Responsibility ◽  
Social Responsibility ◽  
Individual Investors ◽  
Future Market ◽  
Small Probability ◽  
Market Returns ◽  
Short Term ◽  
Noise Traders ◽  
Seeking Behavior ◽  
Corporate Social

Understanding individual investors’ short-term behavior toward skewness is essential for the management and investment of corporate social responsibility because the skewness-seeking behavior of individual investors, which causes a bubble in the market, makes the market as a whole more vulnerable, and it is difficult for the market to be sustainable. In the Korean stock market, we investigated whether average skewness can predict future market returns at the market level and whether the mispricing is associated with demand for the skewness of individual noise traders. Measuring the demand for skewness by the proportion of trading money of individual investors, we found that average skewness negatively predicts future market excess return when the demand for skewness is strong. The result is robust to controlling for market variance as well as other predictors. Our finding indicates that the overall market is overpriced when individual investors excessively trade to seek huge returns in spite of a small probability.

scholarly journals Dissecando Anomalias com o Modelo de Cinco Fatores para Mercado Acionário Brasileiro

2018 ◽  
Vol 16 (1) ◽  
pp. 81
Author(s):  
Alexandre Schwinden Garcia ◽  
André Alves Portela Santos
Keyword(s):  
Crucial Role ◽  
Small Firms ◽  
Pricing Model ◽  
Market Returns ◽  
International Evidence ◽  
Fama And French ◽  
High Beta

This article estimates for the Brazilian market the multifactor pricing model proposed by Fama and French (2015, 2016) and provides a detail of five anomalies: beta, net share issues, momentum, volatility and accruals. The results indicate that the inclusion of the profitability factor proposed in Fama and French (2015) plays a crucial role in reducing the magnitude of the intercepts and of the GRS statistic for all size-anomaly sorted portfolios considered in the article. Consistent with international evidence, the results indicate, among other things, that (i) companies that repurchase shares have higher returns and are more conservative in terms of investment, (ii) firms with lower volatility have higher returns, and are less sensitive to the market returns, (iii) small firms are more aggressive in terms of investment and less profitable, (iv) high beta was associated with higher returns only among small firms and (v) average returns of companies with high accruals is higher in comparison to those of companies with low accruals.

The Information Content of Option-Based Forecasts of Volatility: Evidence from the Italian Stock Market

2013 ◽  
Vol 03 (01) ◽  
pp. 1350005 ◽  
Author(s):  
Silvia Muzzioli
Keyword(s):  
Stock Market ◽  
Value At Risk ◽  
Implied Volatility ◽  
Practical Importance ◽  
Trading Strategies ◽  
Market Volatility ◽  
Future Market ◽  
Market Returns ◽  
Policy Makers ◽  
Volatility Index

The aim of this paper is to comprehensively compare option-based measures of volatility, with the ultimate plan of devising a new volatility index for the Italian stock market. The performance of the different implied volatility measures in forecasting future volatility is evaluated both in a statistical and in an economic setting. The properties of the implied volatility measures are also explored, by looking at both the contemporaneous relationship between implied volatility changes and market returns and the usefulness of the proposed index in forecasting future market returns. The results of the paper are of practical importance for both policy-makers and investors. The volatility index, based on corridor measures, could be used to forecast market volatility, for value at risk purposes, in order to determine trading strategies on the underlying index and as an early warning for future market conditions.

Economic policy uncertainty, market returns and expected return predictability

2017 ◽  
Vol 9 (3) ◽  
pp. 242-259 ◽  
Author(s):  
Frederick A. Adjei ◽  
Mavis Adjei
Keyword(s):  
Economic Policy ◽  
Predictive Power ◽  
Negative Impact ◽  
Future Market ◽  
Policy Uncertainty ◽  
Market Returns ◽  
Expected Return ◽  
Content Type ◽  
Economic Policy Uncertainty ◽  
The Impact

Purpose Using the economic policy uncertainty (EPU) index as a proxy for the level of EPU, we study the impact of the level of EPU on the conditional mean of market returns and we examine the predictive power of EPU on future market returns. Design/methodology/approach We employ a GARCH-in-Mean model with exogenous variables. Findings The results show that even after controlling for business cycle effects, EPU is inversely related to contemporaneous market returns. Particularly, the authors find that the negative impact of EPU subsists only during recessions or recessionary states of the economy, and has no discernible effects during expansionary periods. Originality/value This is the first study to examine the predictive power of EPU on future market returns.

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