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Fads, Martingales, and Market Efficiency
Abstract
Predictable variation in equity returns might reflect either (1) predictable changes in expected returns or (2) market inefficiency and stock price “overreaction.” These explanations can be distinguished by examining returns over short time intervals since systematic changes in fundamental valuation over intervals like a week should not occur in efficient markets. The evidence suggests that the “winners” and “losers” one week experience sizeable return reversals the next week in a way that reflects apparent arbitrage profits which persist after corrections for bid-ask spreads and plausible transactions costs. This probably reflects inefficiency in the market for liquidity around large price changes.
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Citations
Cited by
Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency
JEGADEESH, N., & TITMAN, S. (1993) · The Journal of Finance · doi:10.1111/j.1540-6261.1993.tb04702.x · Cited by 11,584
FAMA, E. F. (1991) · The Journal of Finance · doi:10.1111/j.1540-6261.1991.tb04636.x · Cited by 5,350
Simple technical trading rules and the stochastic properties of stock returns
BROCK, W., LAKONISHOK, J., & LeBARON, B. (1992) · The Journal of Finance · doi:10.1111/j.1540-6261.1992.tb04681.x · Cited by 2,301
Do Industries Explain Momentum?
Moskowitz, T. J., & Grinblatt, M. (1999) · The Journal of Finance · doi:10.1111/0022-1082.00146 · Cited by 1,766
CHAN, L. K. C., JEGADEESH, N., & LAKONISHOK, J. (1996) · The Journal of Finance · doi:10.1111/j.1540-6261.1996.tb05222.x · Cited by 1,279
Metadata
- Authors
- Lehmann, B. N.
- Venue
- The Quarterly Journal of Economics
- Publisher
- Oxford University Press (OUP)
- Published
- 1990-02
- Volume
- 105
- Issue
- 1
- Pages
- 1
- ISSN
- 0033-5533 (ISSN-L)
- OpenAlex
- W2010891591
- Cited by
- 1,568
- References
- 0
- FWCI
- 33.37
- Type
- journal article
- Language
- en
- Open access
- closed
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Contains information from the Semantic Scholar Academic Graph Datasets, made available under the ODC Attribution License (ODC-BY 1.0).
Semantic Scholar’s data is described in: Kinney, R., et al. (2023). The Semantic Scholar Open Data Platform. arXiv:2301.10140.
