Page 38 - FINAL CFA SLIDES DECEMBER 2018 DAY 13
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LOS 46.f: Describe market                                   Session Unit 13:
                                                                  46. Market Efficiency
       anomalies, p241



     Anomalies in Time-Series Data:

     • Calendar anomalies e.g. the January effect –during first 5 of January stock returns,
          especially small stocks, much higher than rest of the year
     • Overreaction and momentum anomalies –tendency for investors to overact to expected

          good news and expected bad news! Momentum effects –high short-tern returns followed

          by continued high returns! –challenges weak form hypothesis?

      Anomalies in Cross-Sectional Data                  tanties

      • Size effect –small cap stocks often tend to outperform large cap stocks!

      • The value effect –value (lower P/E, lower M/B, higher D/Y) stocks often tend to

           outperform growth (higher P/E, higher M/B, lower D/Y) stocks


       Other Anomalies

       • Closed-end investment funds –their shares often trade at prices that sometimes deviate

            from the net asset value (NAV)
       • Earnings announcements – full adjustment does not occur on these dates so profitable

            strategy can be generated by either buying stocks with positive earnings surprise and

            selling stocks with negative earnings surprise!

       • Initial public offerings –typically under priced!
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