Sensitivity analyses of anomalies in developed stock markets

Durham, J. Benson

doi:10.1016/s0378-4266(00)00143-6

Cited by 23 publications

(21 citation statements)

References 40 publications

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“…As Durham (2000aDurham ( , 2000bDurham ( , 2001) argues, the rigor of asset pricing studies is less advanced compared with sensitivity analyses of growth regressions, as very few studies satisfactorily control for competing explanations of market risk proxies or anomalies.…”

Section: Eba Of Previous Resultsmentioning

confidence: 99%

“…While the details of EBA can be found elsewhere (Durham, 2000a(Durham, , 2001) the basic framework follows…”

Section: Eba Of Previous Resultsmentioning

confidence: 99%

“…For example, according to Conover et al (1999aConover et al ( , 1999b, central bank policy is the sole determinant of stock market performance. But, given the vast number of factors that purportedly explain stock market returns, this study uses extreme bound analysis (EBA) (Durham, 2000a(Durham, , 2000b(Durham, , 2001 to control for other factors and to evaluate whether previous results are spurious. Second, the period over which previous literature estimates the relation is considerably lengthy.…”

Section: Sensitivity Analysesmentioning

confidence: 99%

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The Effect of Monetary Policy on Monthly and Quarterly Stock Market Returns: Cross-Country Evidence and Sensitivity Analyses

Durham

2001

FEDS

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Several studies report an empirical link between changes in monetary policy and short-as well as long-run stock market performance in the United States. Such findings are germane both to the study of market determinants and to monetary policy transmission mechanisms. Previous univariate time-series results on long-run data, which use the discount rate as the main policy indicator, seem robust to alternative specifications of stock price returns given data on 16 countries from 1956 through 2000. However, out-of-sample tests indicate that the relation has largely decreased over time. Also, panel regressions, which notably include cross-sectional variance and therefore are particularly relevant to market participants, suggest that the relation is less sturdy, and consideration of excess as opposed to raw equity price returns in time-series regressions indicates no relation. Finally, alternative measures of central bank policy suggest a weaker and a diminished correlation between monetary policy changes and long-run stock market performance.

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Section: Eba Of Previous Resultsmentioning

confidence: 99%

“…While the details of EBA can be found elsewhere (Durham, 2000a(Durham, , 2001) the basic framework follows…”

Section: Eba Of Previous Resultsmentioning

confidence: 99%

Section: Sensitivity Analysesmentioning

confidence: 99%

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The Effect of Monetary Policy on Monthly and Quarterly Stock Market Returns: Cross-Country Evidence and Sensitivity Analyses

Durham

2001

FEDS

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“…1 Studies document momentum profits with respect to individual shares (Jegadeesh and Titman, 1993;Rouwenhorst, 1999), aggregate equity market indexes (Asness et al, 1997;Durham, 2001), currencies and commodities (e.g., Menkhoff et al, 2012;Gorton et al, 2012;Ilmanen, 2011;Asness et al, 2013;Moskowtiz, 2012) , and speculative-rather than investment-grade corporate bonds (Jostova et al, 2013). Empirical tests usually comprise sorting portfolios based on past returns that are long or over-weight past winners and short or under-weight past losers, calculating corresponding returns, and evaluating risk exposure with imperfect proxies.…”

Section: Introductionmentioning

confidence: 99%

Momentum and the Term Structure of Interest Rates

Durham

2013

SSRN Journal

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A vast literature reports excess returns to momentum strategies across many financial asset classes. However, no study examines trading rules based on price history along individual government-bond term structures-that is, with respect to duration buckets across the curve-as opposed to across sovereign markets or individual term structures as a whole over time. Under duration-neutral and long-only constraints as well as low trading costs, this paper reports excess annualized returns of up to 120 basis points and information ratios as high as 0.79 using U.S. Treasury total return data from December 1996 through July 2013. Given a corresponding longshort strategy with no absolute duration risk, excess returns and information ratios are up to 207 basis points and 1.01, respectively. Unlike momentum strategies in some other asset classes, the excess return distributions are positively skewed, and momentum loads, if in any way, favorably on broad risk factors. Returns correlate to a degree with portfolios based on instantaneous forward term premium estimates, in turn derived from a set of Gaussian arbitrage-free affine term structure models. However, substantial variance remains unexplained, the betas are less than one, and the alphas are meaningfully positive. A caveat is that underlying behavioral explanations for momentum are lacking in the context of the U.S. Treasury market.

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“…While the majority of financial research assumes a broad rationality, many recent studies highlight market anomalies and the link between psychology and behavioral finance, e.g., the January effect, the weekend effect, the small firm effect, and the momentum effect (Durham, 2001;Rachev et al, 2007;Huang and Wang, 2009).…”

Section: Introductionmentioning

confidence: 99%