Analysts' Underreaction and Momentum Strategies.

Abstract

Motivated by the Hong and Stein (HS 1999) model, I test whether the newswatchers' underreaction explains the abnormal variation of stock prices driven by the momentum effect. I rely on analysts' consensus estimates as a proxy for newswatchers' expectations to propose a parsimonious estimate of analysts' predictable underreaction (APU). The results show that APU strongly predicts analysts' revisions, analysts' errors and, more importantly, stock returns. A long-short strategy based on APU generates a value-weighted Fama and French six-factor alpha of 0.96% per month (t-stat of 3.66). Furthermore, I propose an underreaction factor that subsumes the momentum factor in spanning tests and can better explain alternative specifications of earnings and returns momentum. The results support the HS model and APU's use as a proxy for newswatchers' underreaction by showing that underreaction and overreaction are part of a unified theory.

The state of the global education crisis: a path to recovery

“…And with that duration of school closures, learning poverty was expected to increase by 10 percentage points, reaching 63 percent. 26…”

“…In both new simulated scenarios, remote learning is expected to have performed in the same way, and in line with the pessimistic scenario of November 2020, and schools are assumed to be fully closed. 28 Results by income groups (see (2) Nov/2020 pessimistic scenario assumes 70 percent of school closure and about 10 percent of the learning losses while schools are closed will be fully mitigated in high-income countries, but in the developing world, 7 percent as described in Azevedo (2020); (3) Nov/2021 simulations build on the same remote learning effectiveness parameters as in Azevedo (2020), however, actual length of school closure information builds on UNESCO database (as used in Figure 2); Intermediate scenario: partial reopening is assumed to be at 50 percent of the system; Pessimistic scenario: Partial reopening is assumed to be negligible, or that the system was fully closed. For details on the November/2021 simulation update see Azevedo, Cloutier et al (2021).…”