By Vijay Singal
In an effective industry, all shares could be worth a value that's in step with to be had details. yet as monetary professional Vijay Singal, Ph.D., CFA, issues out, there are conditions less than which definite shares promote at a value larger or below the correct expense. In past the Random stroll, Singal discusses ten such anomalous costs and exhibits how traders might--or may possibly not--be capable of take advantage of those events for revenue. the writer distills a number of many years of educational study right into a centred dialogue of marketplace anomalies that's either obtainable and worthwhile to individuals with various backgrounds. previous empirical proof is supplemented with author's personal study utilizing more moderen facts. Anomalies coated contain the "December Effect," "Momentum in Stocks," "S&P 500 Index Changes," "Trading by way of Insiders," and "Merger Arbitrage." In every one bankruptcy, the writer describes the actual anomaly, explains the way it happens, exhibits how one can reap the benefits of the paradox, and highlights the hazards concerned. We study, for instance, that stocks of shares that experience preferred in fresh months develop into scarce in overdue December, simply because traders wait until eventually January prior to they promote (to put off fee of taxes on profits). This shortage drives the cost up--the "December Effect"--and clever purchasers could make the identical of seventy five% annual go back on a five-day funding. each one bankruptcy comprises feedback for extra interpreting in addition to tables and graphs that aid the dialogue. The publication concludes with a preview of many different attention-grabbing anomalies and a piece on how investor habit could impression costs. in actual fact written and informative, this well-researched quantity is a needs to learn for traders, investors, marketplace experts, and scholars of economic markets.
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Additional info for Beyond the random walk: A guide to stock market anomalies
Low-Risk Strategies for the High-Performance Investor (Chicago: Probus). This book focuses on convertible bonds. O’Shaughnessy, James P. 2001. What Works on Wall Street: A Guide to the Best-Performing Strategies of All Time (New York: McGraw-Hill). Shefrin, Hersh. 2000. Beyond Greed and Fear: Understanding Behavioral Finance and the Psychology of Investing, Financial Management Association Survey and Synthesis Series (Boston: Harvard Business School Press). Shleifer, Andrei, and Robert W. Vishny.
1985. Low-Risk Strategies for the High-Performance Investor (Chicago: Probus). This book focuses on convertible bonds. O’Shaughnessy, James P. 2001. What Works on Wall Street: A Guide to the Best-Performing Strategies of All Time (New York: McGraw-Hill). Shefrin, Hersh. 2000. Beyond Greed and Fear: Understanding Behavioral Finance and the Psychology of Investing, Financial Management Association Survey and Synthesis Series (Boston: Harvard Business School Press). Shleifer, Andrei, and Robert W.
If the earnings announcement is positive, the stock price rises. But the rise is stymied by the premature selling initiated by individual investors who sell to realize gains. As the selling pressure abates, the stock price slowly rises to the correct level. On the other hand, if the earnings announcement is negative, the stock price falls. But it does not fall sufficiently because individual investors continue to hold on to the stock hoping to recoup their losses. The stock eventually reaches the correct price but with a delay due to the behavioral biases of the investors.
Beyond the random walk: A guide to stock market anomalies by Vijay Singal