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This paper provides a novel perspective to the nexus of oil prices and stock markets by examining the impact of oil price shocks on stock market anomalies. After decomposing oil price shocks into three types (Kilian, 2009), we find that aggregate demand shocks have the strongest influence on stock market anomalies. In contrast, oil supply shocks and oil specific demand shocks have little impact. Similar results are also found in the industry analysis. Interestingly, the link between aggregate demand shocks and anomalies are the strongest among firms with either small size or high idiosyncratic risks. The documented effects are robust after controlling for investor sentiment as well as several well-known macroeconomic or market factors. Our findings are consistent with but also extend the results of Stambaugh, Yu, and Yuan (2012) in that we show that uncertainty also plays a role in explaining stock market anomalies.

This paper provides strong and novel evidence of the preference among investors for lottery-like payoffs by documenting a strong intra-industry MAX effect in REITs. Specifically, REITs with high maximum daily returns (high MAX) over the past 1-month significantly underperform REITs with low maximum daily returns (low MAX) over the same period. Such underperformance is persistent in subsequent months, although the underperformance is significant only in several months. In general, high MAX REITs are smaller and exhibit lower prices and higher idiosyncratic volatility than other REITs. However, firm characteristics cannot explain the MAX effect among REITs. In contrast, the MAX effect could significantly explain the idiosyncratic volatility puzzle among REITs. Moreover, the MAX effect is more pronounced among REITs with low institutional ownerships, while investor sentiment has no significant effect on the MAX effect among REITs.

We show that price anchors have a role in understanding short-run reversals in one-month stock returns, in conjunction with the well-known liquidity-provision channel. Specifically, we find that one-month reversal strategies perform much better for stocks that have: (1) a low price, relative to their 52-week high (George and Hwang (2004)); and (2) a low capital-gains-overhang (Grinblatt and Han (2005)). Further, we uncover striking asymmetries in the reversal behavior between past winners and past losers, depending upon the stock's price relative to the price reference points. These reversal asymmetries fit with the hypothesized price-anchoring biases.

This paper evaluates the effectiveness of a joint strategy that exploits fundamental‐based momentum and return‐based reversal anomalies. This joint strategy is motivated by two considerations. First, reversal can serve as a natural hedge to momentum. Second, both fundamental and price‐related information can contribute to stock return predictability. Consequently, we propose a new joint strategy that synthesises both earnings momentum and short‐term reversal. We find that this joint strategy generates considerable economic gains and outperforms the sum of profits from two individual anomalies. Moreover, the proposed strategy appears to be quite robust, generating stable and persistent profits across different market conditions.

This paper documents the systematic and negative effects of heightened macro uncertainty on financial analyst performance and the potential for managerial ability to moderate such negative effects. Specifically, we find that macro uncertainty measures are significantly and negatively correlated with the accuracy and informativeness of analysts’ earnings forecasts and positively correlated with the dispersion of earnings forecasts. Furthermore, we find that the negative effects of macro uncertainty on analyst performance are significantly mitigated in firms with high managerial ability. Our results provide a broad overview regarding the negative effects of macro uncertainty on analyst performance and indicate that managerial ability could be a potential moderator to mitigate the negative impacts of macro uncertainty on analyst performance, which is based on the upper-echelons theory.

In this article, the authors propose a simple and novel measure of relative strength over investment horizons that synthesizes short- and intermediate-term price information. The relative-strength measure compares the short-term price trend with the intermediate-term price trend. The relative strength strategy generates substantial profits, which are greater than a simple sum of traditional short-term reversal and momentum profits. The superior performance of the relative strength strategy is evident after risk adjustments for various factor models and is robust across subperiods and different market conditions. These findings seem consistent with investor conservatism and the idea that investors are slow to adjust to new information. TOPICS:Analysis of individual factors/risk premia, factor-based models, style investing Key Findings • A novel relative-strength measure over investment horizons that synthesizes short- and intermediate-term price information can significantly predict subsequent short-term returns. • The relative-strength strategy generates substantial profits, which are greater than a simple sum of traditional short-term reversal and momentum profits. • The superior performance of the relative-strength strategy is evident after risk adjustments for various factor models and is robust across subperiods and different market conditions.

This paper investigates the relation between short selling and momentum. We document that a consistent momentum strategy that buys lightly shorted winners and sells heavily shorted losers exhibits strong short-term momentum and no long-term reversal. In contrast, an inconsistent momentum strategy that buys heavily shorted winners and sells lightly shorted losers experiences weak short-term momentum and persistent long-term reversal. Our results are robust after controlling for firm characteristics, proxy for short-sale constraints, and investor sentiment, as well as an exogenous shock (the Taxpayer Relief Act of 1997). These findings present a new challenge to existing theories of momentum that rely solely on investor underreaction and overreaction.

We document that the fundamental strength (FSCORE) of a firm exerts a significant influence on the performance of short-term reversal strategies. Past losers with strong fundamentals significantly outperform past winners with weak fundamentals. Our FSCORE approach is complementary to Da et al. (2014) cash flow news metrics based on analysts’ forecast revisions in that many firms do not have analyst following. Our approach also seems capable of capturing the lagged effects from past fundamental news shocks. After controlling for fundamental strength, we find that investor sentiment plays a more dominant role than do liquidity shocks in explaining return reversal.

This paper documents that both domestic and cross-country economic policy uncertainty have significant impacts on the behaviours of domestic analysts in the United Kingdom. Specifically, domestic economic policy uncertainty has significant negative impacts on analyst earnings forecast accuracy, dispersion, and both analyst recommendation upgrades and downgrades, whereas it has no significant impact on analyst coverage in the United Kingdom. An industry analysis shows that the effects of policy uncertainties on analyst behaviours vary across industries. Moreover, European and global economic policy uncertainty have similar cross-country impacts as U.K. policy uncertainty on analyst behaviours in the United Kingdom, whereas U.S. policy uncertainty exhibits different impacts. This study presents novel and comprehensive evidence of the impacts of policy uncertainty on an important information intermediary that has significant influences on capital market efficiency, providing practical implications for investors, analysts, corporate managers, and policy makers.

This article investigates the interaction between short-term reversal and momentum strategies. The authors find that the magnitude of price reversals of short-term winners and losers is significantly related to past medium-term performance. Both past medium-term winners and losers with the best short-term performance experience the strongest price continuation. Short-term reversal strategies perform best in the momentum-loser quintile, and momentum strategies perform best in the short-term-winner quintile. The authors’ results imply that investors could achieve higher momentum profits by also considering short-term performance and vice versa. The results also suggest that investors adhere to prior dominant beliefs in the face of new contradictory information. Short squeezes and fire sales (self-attribution bias) may explain the continued underperformance (outperformance) of momentum losers (winners) with good short-term performance.

This paper evaluates the return predictability of fundamental strength in a two-dimensional framework that considers both investor sentiment and limits to arbitrage simultaneously. Sentiment and limits to arbitrage have independent and overlapping explanatory power on the return predictability of fundamental strength. The return predictability of fundamental strength is more pronounced among stocks with high arbitrage costs following high sentiment. Among stocks with low arbitrage costs, the fundamental strength strategy is profitable only following high sentiment. However, among stocks with high arbitrage costs, the same strategy can earn economically and statistically significant profits even following low sentiment. Consistent with Miller (1977), we emphasize the interaction of sentiment and limits to arbitrage on stock valuation.

We explore the underlying reasons for the apparent mispricing of firms based on fundamental information. We document that a relative fundamental strength strategy that buys (sells) firms with strong (weak) fundamentals is highly profitable for up to three years. The results cannot be explained by either price or earnings momentum, are robust to risk adjustments based on standard asset pricing models, and survive a battery of robustness tests. The strategy also works better among small firms, as well as firms with low analyst coverage and a high probability of informed trading. Our empirical findings support the hypotheses of limited investor attention and informed trading.

This paper documents that stocks are not efficiently priced in the oil and gas industry. We find significant cross-sectional effects on stock returns from various firm characteristics in the oil and gas industry. Specifically, 13 out of 15 prominent capital market anomalies are robust in the oil and gas industry. Investor sentiment has significantly positive impact on 4 anomalies: composite equity issues, investment to assets, net stock issues, and value effect. Among the three oil shocks, we find that aggregate demand shocks have significantly impact on 6 anomalies: composite equity issues, financial distress, net stock issues, O-SCORE, return on assets, and idiosyncratic volatility. Our results are consistent with the view that high arbitrage costs and risks have significant deterring effects on arbitrage in the oil and gas industry. Our findings also have practical investment and policy implications for investors, firm managers, and policy makers alike.

This paper contributes to the literature that examines the effects of disclosing the actual number of bidders in contests with stochastic entry by considering resource constraint. We study an all-pay auction with complete information. The auction entails one prize and $n$ potential bidders. Each potential bidder has an exogenous probability of participation and faces an exogenous bid cap. It is shown that the contest organizer prefers fully concealing the information about the number of participating bidders. We extend the result to a case with endogenous entry.

When stocks are trading near their 52-week high, investors tend to have low expectation about their future returns. We contrast such expectations against firms’ fundamental strength. For firms with strong fundamentals, we confirm that investors’ expectations are too low, which is consistent with the hypothesis that the 52-week high acts as a psychological anchor. We report that a fundamental-strength enhanced 52-week high trading strategy significantly outperform the unconditional strategy by nearly doubling its average return. Moreover, we provide interesting evidence that this anomalous effect is most evident when investor sentiment is high, but absent among more sophisticated institutions and short sellers.

Motivated by the implication of prominent behavioral models that a joint consideration of past price changes and firm fundamentals could efficiently identify stock mispricing, we propose an integrated approach that combines fundamental and technical information. This integrated approach generates substantial economic gains, which are comparable to those of strategies double-sorted on characteristics related to high turnover and trading costs and state-of-the-art machine learning strategies in existing studies. The performance net of transaction costs is still attractive. Consistent with behavioral models, limits to arbitrage and information asymmetry play a significant role in explaining the super performance of this integrated approach.

This paper examines the effects of disclosing the actual number of bidders in contests with stochastic entry and with resource constraint. We study an all-pay auction with complete information. The auction entails one prize and n potential bidders. Each potential bidder has an exogenous probability of participation and faces an exogenous bid cap. It is shown that the contest organizer prefers fully concealing the information about the number of participating bidders. We extend the result to a case with endogenous entry.

We document that the fundamental strength (FSCORE) of a firm exerts a significant influence on the performance of short-term reversal strategies. Past losers with strong fundamentals significantly outperform past winners with weak fundamentals. Our FSCORE approach is complementary to Da et al. (2014) cash flow news metrics based on analysts’ forecast revisions in that many firms do not have analyst following. Our approach also seems capable of capturing the lagged effects from past fundamental news shocks. After controlling for fundamental strength, we find that investor sentiment plays a more dominant role than do liquidity shocks in explaining return reversal.

The aim of the present study was to investigate the correlation between glucocorticoid activity regulation, prostaglandin E2 (PGE2) synthesis, and synovial inflammation inhibition activity, through microsomal prostaglandin E synthase-1 (mPGES-1) expression regulated by the glucocorticoid pre-receptor regulator, 11β-hydroxysteroid dehydrogenase-1 (11β-HSD1). In the present study, fibroblast-like synovial cells of rats were studied as a cell model. Cells were stimulated with 10 ng/ml interleukin (IL)-1β for 24 h, and were subsequently, within the next 24 h, treated with or without 10-6 mmol/l corticosterone alone or with 100 nmol/l PF915275. At the end of the second 24 h, PGE2 levels in culture supernatants were assayed. Cells were harvested for mRNA evaluation of 11β-HSD1, mPGES-1, IL-1β and tumor necrosis factor (TNF)-α, and protein detection of 11β-HSD1 and mPGES-1 using reverse transcription-qualitative polymerase chain reaction and western blot analysis, respectively. Corticosterone was demonstrated to suppress the mRNA expression levels of inflammatory factors, such as TNF-α and PGE2, induced by IL-1β in vitro. Simultaneously, expression levels of 11β-HSD1 decreased significantly at the mRNA and protein levels (P