A Closer Look at the Short-Term Return Reversal

• 成果类型: Article
• 署名作者: Da, Zhi; Liu, Qianqiu; Schaumburg, Ernst
• 署名单位: University of Notre Dame; University of Hawaii System; Federal Reserve System - USA; Federal Reserve Bank - New York
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2013.1766
• 发表日期: 2014
• 页码: 658-674
• 关键词: short-term return reversal; liquidity; Sentiment; fundamental news

摘要

Stock returns unexplained by fundamentals, such as cash flow news, are more likely to reverse in the short run than those linked to fundamental news. Making novel use of analyst forecast revisions to measure cash flow news, a simple enhanced reversal strategy generates a risk-adjusted return four times the size of the standard reversal strategy. Importantly, isolating the component of past returns not driven by fundamentals provides a cleaner setting for testing existing theories of short-term reversals. Using this approach, we find that both liquidity shocks and investor sentiment contribute to the observed short-term reversal, but in different ways: Specifically, the reversal profit is attributable to liquidity shocks on the long side because fire sales more likely demand liquidity, and it is attributable to investor sentiment on the short side because short-sale constraints prevent the immediate elimination of overvaluation.