Research & Publications
(Journal of Investment Management, Third Quarter 2014) We investigate whether large stock price changes are associated with short-term reversals or momentum, conditional on the issuance of analyst price target or earnings forecast revisions immediately following these price changes. Our study provides evidence that prices of stocks exhibit momentum when analysts issue revisions after large price shocks, and suggests that the initial price changes were indeed based on new information. In contrast, when price changes are not followed by immediate analyst revisions, we document short-term reversals, indicating that the initial price shocks were likely caused by liquidity or noise traders. A trading strategy that is based on the direction of the price change and the existence of analyst revisions in the same direction earns significant abnormal monthly returns (over 1%).
(Journal of Investment Management, Third Quarter 2013) This study of gender distribution in the asset management industry investigates women's underrepresentation in key positions in the investment business. The study finds no evidence that this is attributable to differences in skill, asset gathering capability, or departure rates. However, it does find some evidence of self-selection away from risk. This has broader implications for asset management, diversity, and talent development.
No-Arbitrage Conditions and Expected Returns When Assets Have Different Betas in Up and Down Markets
(Journal of Asset Management, January 2014) We present a model of expected returns when assets have different betas in up and down markets. Our model provides a useful perspective on what systematic risks are and how they are priced. Empirical evidence shows that contemporaneous stock returns are strongly correlated with downside betas, but weakly correlated with upside betas.
(Journal of Portfolio Management, Spring 2012) This study examines the immediate and delayed market responses to revisions in analyst forecasts of earnings, target prices, and recommendations. Consistent with prior literature, revisions in earnings forecasts are positively and significantly associated with short-term market returns around the revisions. However, we show that short-term market returns around target price revisions and recommendation changes are even stronger. We also find superior future performance (return drift) for portfolios that use information from all three types of revisions to those using information from only one of the three types of revisions.
(Journal of Portfolio Management, Spring 2008) An alpha indicator can lose its efficacy if too many investors use it in their trading decisions. Thus, a robust alpha factor model should consider how much of the information in a signal may already be reflected in stock prices.
(The Journal of Investing, Spring 2007) In a well-diversified portfolio, relaxing the long-only constraint should not increase the downside risk of portfolio alphas. This is likely even if the underlying stock selection strategy has a bias toward stocks with negatively skewed returns.
(Financial Analysts Journal, May/June 2004) Not all insider sales are the same. The percentage of shares owned by insiders is useful for predicting future returns following insider purchases.
(Journal of Investment Management, Fall 2003) All enhanced managers control tracking error by diversifying and controlling factors exposures. Once these variables are controlled, the excess returns of these managers have remarkably low correlations, even among those following seemingly similar strategies.
(Journal of Portfolio Management, Winter 2003) Might investor overconfidence systematically bias stock prices and create investment opportunities across different countries and different cultures? Valuation theory is used to suggest where such biases are most likely to occur.
(Financial Analysts Journal, March/April 2003) Though recent research regarding trading volume suggests the existence of an exploitable deviation from market efficiency, we show that, after earnings-related news and a stock's growth rate have been controlled for, the interaction between momentum and volume largely disappears.
(Financial Analysts Journal, July/August 1999) A probe of the consequences of behavioral biases in the context of valuation theory.