By Vijay Singal
In an effective industry, all shares may be worth a cost that's in step with on hand info. yet as monetary professional Vijay Singal, Ph.D., CFA, issues out, there are situations below which yes shares promote at a cost greater or under definitely the right fee. In past the Random stroll, Singal discusses ten such anomalous costs and exhibits how traders might--or may perhaps not--be in a position to make the most those events for revenue. the writer distills numerous a long time of educational study right into a targeted dialogue of marketplace anomalies that's either available and worthwhile to individuals with various backgrounds. prior empirical facts is supplemented with author's personal study utilizing newer facts. Anomalies lined comprise the "December Effect," "Momentum in Stocks," "S&P 500 Index Changes," "Trading through Insiders," and "Merger Arbitrage." In each one bankruptcy, the writer describes the actual anomaly, explains the way it happens, indicates how you can benefit from the ambiguity, and highlights the dangers concerned. We study, for instance, that stocks of shares that experience favored in contemporary months turn into scarce in past due December, simply because traders wait until eventually January prior to they promote (to delay check of taxes on profits). This shortage drives the fee up--the "December Effect"--and clever purchasers could make the an identical of seventy five% annual go back on a five-day funding. every one bankruptcy contains feedback for extra studying in addition to tables and graphs that help the dialogue. The publication concludes with a preview of many different fascinating anomalies and a bit on how investor habit may perhaps impression costs. essentially written and informative, this well-researched quantity is a needs to learn for traders, investors, industry experts, and scholars of monetary markets.
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Extra info for Beyond the random walk: A guide to stock market anomalies
Reinganum, Mark. 1983. The Anomalous Stock Market Behavior of Small Firms in January: Empirical Tests for Tax-Loss Selling Effects. Journal of Financial Economics 12, 89–104. Wachtel, Sidney. 1942. Certain Observations on Seasonal Movement in Stock Prices. Journal of Business (April), 184–93. Notes 1. This chapter is based on research in Chen and Singal (2003a, 2003b). Other works used in this chapter include Bhabra, Dhillon, and Ramírez (1999), Constantinides (1984), Keim (1983), Poterba and. Weisbenner (2001), and Haugen and Jorion (1996).
Journal of Finance 56(1), 353–68. Reinganum, Mark. 1983. The Anomalous Stock Market Behavior of Small Firms in January: Empirical Tests for Tax-Loss Selling Effects. Journal of Financial Economics 12, 89–104. Wachtel, Sidney. 1942. Certain Observations on Seasonal Movement in Stock Prices. Journal of Business (April), 184–93. Notes 1. This chapter is based on research in Chen and Singal (2003a, 2003b). Other works used in this chapter include Bhabra, Dhillon, and Ramírez (1999), Constantinides (1984), Keim (1983), Poterba and.
Return Minus Dec. 124+ Daily returns in percent. The January return is for the first month in the calendar year following the month of December. That is, if the December return is for 2000, then the corresponding January return is for 2001. Statistical significance is at better than 1 percent for returns marked with * and at better than 5 percent for returns marked with +. 31 31 32 Beyond the Random Walk return in January, implying that the difference in performance is concentrated in the ten days around the end of the year.