Does the stock market overreact to corporate earnings information?

Article Abstract:

This paper tests whether the stock market overreacts to extreme earnings, by examining firms' stock returns over the 36 months subsequent to extreme earnings years. While the poorest earners do outperform the best earners, the poorest earners are also significantly smaller than the best earners. When poor earners are matched with good earners of equal size, there is little evidence of differential performance. This suggests that size, and not investor overreaction to earnings, is responsible for the "overreaction" phenomenon, the tendency for prior period losers to outperform prior period winners in the subsequent period. (Reprinted by permission of the publisher.)

Profits, Stock-exchange, Stock exchanges, Arbitrage, Corporate profits

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A portfolio approach to estimating the average correlation coefficient for the constant correlation model

Article Abstract:

This paper presents a portfolio approach to estimating the average correlation coefficient of a group of stocks which are considered for portfolio analysis. The average correlation coefficient has been shown to produce a better estimate of the future correlation matrix than individual pairwise correlations. The advantage of the approach described here is that it does not require the estimation of pairwise correlations for estimating their average. (Reprinted by permission of the publisher.)

Evaluation, Stocks

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Closed-end fund shares' abnormal returns and the information content of discounts and premiums

Article Abstract:

Closed-end funds' discounts contain information in the sense that they can be used to construct portfolios that earn returns exceeding those predicted by the two-factor capital asset pricing model. The precise nature of the information contained in a discount is not clear, however. This paper provides evidence that the information contained in a discount is an incomplete prediction of the fund's likelihood of being open-ended profitably. (Reprinted by permission of the publisher.)

Mutual funds

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