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Using an extensive sample consisting of 30 emerging countries and 38 years of data, we examine the profitability of two momentum and two trend following strategies. Over the entire sample, we find excess returns that are economically and statistically significant for all four strategies. Furthermore, we show that the significance of the excess returns remains after adjusting for macroeconomic risk factors. In addition, we find that in spite of their relative neglect, trend strategies frequently demonstrate superior performance, compared to momentum strategies. However, contrary to previous research, we do not find that time series momentum strategies outperform cross-sectional momentum strategies. Finally, we show that the effectiveness of the alternative strategies is largely diminished once transactions costs and liberalizations in emerging markets are considered.

We show that previous findings regarding the profitability of trend-following trading rules over intermediate horizons in futures markets also extend to individual U.S. stocks. Portfolios formed using technical indicators such as moving average or channel ratios, without employing cross-sectional rankings of any kind, tend to perform about as well as the more commonly examined momentum strategies. The profitability of these strategies appears significant, both statistically and economically, through 2007, but evidence of profitability vanishes after 2007. Market-state dependence, while clearly present, does not explain the post-2007 reduction in returns to these strategies.

This paper examines the performance of trend-following trading strategies in commodity futures markets using a monthly dataset spanning 48 years and 28 markets. We find that all parameterizations of the dual moving average crossover and channel strategies that we implement yield positive mean excess returns net of transactions costs in at least 22 of the 28 markets. When we pool our results across markets, we show that all of the trading rules earn hugely significant positive returns that prevail over most subperiods of the data as well. These results are robust with respect to the set of commodities the trading rules are implemented with, distributional assumptions, data-mining adjustments and transactions costs, and help resolve divergent evidence in the extant literature regarding the performance of momentum and pure trend-following strategies that is otherwise difficult to explain.

In this study, we examine financial reporting lags, the incidence of late filing, and the relationship between reporting lags, firm performance and the degree of capital market scrutiny. We use a large sample of firms spanning 22 countries over a eleven-year period. A focal point of our analysis is whether the incidence of late filing, and the relations between reporting days and other variables, differ systematically between common and code law countries. Relative to U.S. firms, we report that the time taken and allowed for filing is usually longer in other countries and that the statutory requirement is more frequently violated. Timely filing is found to be less frequent in code law countries. Poor firm performance and longer reporting lags are more strongly linked in common law countries. We also find that whereas greater capital market scrutiny and more timely filing are related, there is less support for a relationship between the level of debt financing and timely filing in code law countries.

Unlike previous papers, which have focused on the timeliness ranks, we examine Value Line’s 3–5 year projections for stock returns, earnings, sales and related measures. We find that Value Line’s stock return and earnings forecasts exhibit large positive bias, although their sales predictions do not. For stock returns, Value Line’s projections lack predictive power; for other variables predictive power may exist to some degree. Our findings suggest the spectacular past performance of the timeliness indicator reflects either close alignment with other known anomalies or data mining, and that investors and researchers should use Value Line’s long-term projections with caution.

Commodity futures and equity markets differ in several important respects. Nevertheless, it was found that momentum profits in commodities are highly significant for holding periods as long as 9 months, and returns to momentum strategies are roughly equal in magnitude to those that have been reported in stocks. The profits documented are too large to be subsumed by transactions costs. Although the momentum strategies appear to be quite risky, their profitability cannot be fully accounted for in the context of a market factor model. Further, it is shown that momentum profits eventually reverse if positions are maintained long enough after portfolio formation. © 2007 Wiley Periodicals, Inc. Jrl Fut Mark 27:227–256, 2007

Previous studies have shown that market participants underestimate earnings growth for past winner stocks, and that growth stocks are more sensitive to earnings surprises. These findings suggest implementing momentum strategies with growth stocks. This study investigates linkages between value versus growth investment styles and momentum strategies in international markets. In addition, we extend Jegadeesh and Titman (2001)-type tests, which attempt to distinguish between competing explanations of the momentum phenomenon, to international market indices. Our full sample results show that momentum profits are concentrated in the growth indices, and that there is evidence of short-term overreaction in these and other indices that is subsequently corrected. Our subsample results are mixed; there is some evidence that the profitability of momentum (but not contrarian) strategies persists in the post-December 1987 period. However, unlike the earlier period, there is no evidence that markets overreact and that these overreactions are subsequently corrected.

This study examines the returns, relative to the S&P 500, on cash indices and futures tracking smaller stocks around the turn of the year. While we control for volatility clustering, return autocorrelation in small stock indices, and other calendar effects, our main focus is the evolution of the turn of the year effect through time: in particular, whether the effect is smaller or takes place earlier subsequent to the introduction of the S&P Midcap and Russell 2000 futures in 1993. We find that evidence of a traditional turn of the year effect, in both cash and futures, is confined to the pre-1993 period. Post-1993, there are no abnormal returns during the turn of the year window as a whole. Interestingly, returns in this period remain high on the last trading day of December, but they are negative across the first five trading days of January. In addition, post-1993, we often observe significant abnormal returns prior to the traditional turn of the year, i.e., in the pre-Christmas and post-Christmas windows. Taken together, our results suggest that market participants may be eliminating the turn of the year effect with the aid of two new futures contracts that are well suited to this purpose. © 2004 Wiley Periodicals, Inc. Jrl Fut Mark 24:755–784, 2004

Using data from 35 futures options markets from eight separate exchanges, we test how well the implied volatilities (IVs) embedded in option prices predict subsequently realized volatility (RV) in the underlying futures. We find that for this broad array of futures options, IV performs well in a relative sense. For a large majority of the commodities studied, the implieds outperform historical volatility (HV) as a predictor of the subsequently RV in the underlying futures prices over the remaining life of the option. Indeed, in most markets examined, regardless of whether it is modeled as a simple moving average or in a GARCH framework, HV contains no economically significant predictive information beyond what is already incorporated in IV. These findings add to previous research that has focused on currency and crude oil futures by extending the analysis into a very broad array of contracts and exchanges. Our results are consistent with the hypothesis that futures options markets in general, with their minimal trading frictions, are efficient.

Prior research has documented that volatility in financial asset markets is most directly related to trading rather than calendar days, and that there is an inverse asymmetric relation between volatility and returns in both stocks and long-term bonds. We examine these relations in 37 futures options markets representing a wide variety of asset types. Using futures prices and implied volatilities from this extensive array of markets, we confirm that in all of them, save one, market volatility is more directly related to trading days. However, the nature of the association between implied volatility and underlying asset returns varies greatly across asset categories and across exchanges. Thus, we show that findings from equity markets apparently are not generalizable to other asset classes.

This paper extends previous research by considering three pricing factors for American Depository Receipts (ADRs): the price of the underlying shares in the local currency, the relevant exchange rate, and the US market index. Using both a vector autoregressive (VAR) model with a cointegration constraint and a seemingly-unrelated regression (SUR) approach, we examine the relative importance of, and the speed of adjustment of ADR prices to, these underlying factors. Our results show that while the price of the underlying shares is most important, the exchange rate and the US market also have an impact on ADR prices. While the bulk of the shocks to the pricing factors are reflected in the ADRs within the same calendar day, there are indications that the adjustments are not completed until the following day. Curiously, the ADRs appear to initially overreact to the US market index but underreact to changes in underlying share prices and exchange rates.

The focus of this article is to test the trading cost hypothesis of price leadership, which predicts that the market with the lowest overall trading costs will react most quickly to new information. In an attempt to hold market microstructure effects constant and in contrast to previous studies, we examine intraday price leadership across the S&P 500, NYSE Composite, and MMI futures, and across the respective cash indexes—rather than between each futures and its associated cash index. We find that, among the futures, the S&P 500 exhibits price leadership over the other index futures, whereas among the cash indexes the MMI leads. Both findings are consistent with the trading cost hypothesis. © 1999 John Wiley & Sons, Inc. Jrl Fut Mark 19: 475–498, 1999

This study examines the performance of filter and dual moving-average crossover trading rules applied to Nasdaq stocks. We find that trading rules conditioned on a stock's past price history perform poorly, but those based on past movements in the overall Nasdaq Index tend to earn statistically significant abnormal returns. Since there is a high level of transaction costs in this market, these abnormal returns are generally not economically significant. However, there are indications that pursuing some of these strategies can be worthwhile in carefully selected subsets of stocks.

Takeover defense mechanisms have become common for many modern corporations. In this research, we examine one potential takeover defense mechanism, golden parachutes. In particular, the relationship between the board of directors (and the board committees) and the question of whether the parachutes are aligned with shareholder interests or are a means of entrenching management, is studied. Results show that the composition of the board of directors’ compensation committee influences the market's perceived outcome of golden parachute adoption. When insiders and affiliated outsiders dominate the board's compensation committee, negative returns are more likely to occur than when independent outsiders control the committee.

Moving average trading rules are utilized in both futures and spot foreign currency markets to show that significant, positive profits can be earned in four of five currencies examined. The results are consistent for both in-sample and forward simulation tests. Regression results demonstrate that central bank intervention is strongly associated with the profitability of trading returns for the three major currencies (DM, Yen and Pound), and partially explains returns for the SF and CD. Consistent with conjectures in previous studies that ‘news’ concerning intervention tends to be revealed over weekends, we find that moving average trading rule returns are significantly positive on Fridays and Mondays, and not significantly different from zero in the middle of the week.

This study extends daily returns research in foreign currencies by focusing upon an intraday analysis of futures prices from the International Monetary Market (IMM). We find that insignificant daily returns are generally the result of significant negative returns overnight (when measured relative to the dollar) and significant positive returns during the trading day. The strengthening of foreign currencies intraday is concentrated during the opening hour, as well as during the last two hours of the U.S. trading day. Several other anomalies are found when hourly returns are examined. We propose a transactions hypothesis (reflective of relative country trading patterns) which is consistent with most of the return patterns uncovered.

Most of the academic literature that has examined state lotteries has had a negative assessment of them. Studies of lotteries as a source of revenue have reported that even under the best circumstances, they generate only a tiny proportion of a state's revenues, and the lottery revenues are so volatile that states cannot and should not be dependent on them. In addition, the general consensus is that lotteries have high administrative costs, and that they may reduce other sources of state revenue.1 In contrast to this negative view prevalent in the academic literature, lotteries have been exceedingly popular with policymakers in state capitals and among the general public. Most of the literature which casts a negative light on lotteries as a revenue source looked at data through the mid-1980s. Since then, the number of states operating lotteries has grown from 17 in 1985 to 33 in 1992. In only one state (North Dakota) during the past 30 years has a lottery referendum failed to achieve a majority of votes.2 Why are lotteries so popular? Is it because voters are ill-informed and unsophisticated? Do proponents mistakenly believe that they will help cure government revenue shortfalls? Or is it possible that lotteries really do have a significantly favorable fiscal impact, that lottery revenues are not as small and destabilizing as the academic literature maintains?