Momentum and seasonality in Chinese stock markets

In this paper, we follow Jegadeesh and Titman's (1993, Journal of Finance) approach to examine 25 momentum/contrarian trading strategies using monthly stock returns in China for the period from 1994 to 2007. Our results suggest that there is no momentum profitability in any of the 25 strategies. In contrast, there is some evidence of reversal effects where the past winners become losers and past losers become winners afterward. The contrarian profit is statistically significant for the strategies using short formation and holding periods, especially for the formation periods of 1 to 3 months and the holding periods of 1 to 3 months. The contrarian strategies can generate about 12% per annum on average. Moreover, we follow Heston and Sadka (2008, Journal of Financial Economics) to investigate where there is any seasonal pattern in the cross-sectional variation of average stock returns in our momentum/contrarian strategies. There is no evidence of any seasonal pattern, and the results are robust to different formation and holding periods.

Essays on volatility and liquidity in financial markets

The price formation of financial assets is a complex process. It extends beyond the standard economic paradigm of supply and demand to the understanding of the dynamic behavior of price variability, the price impact of information, and the implications of trading behavior of market participants on prices. In this thesis, I study aggregate market and individual assets volatility, liquidity dimensions, and causes of mispricing for US equities over a recent sample period. How volatility forecasts are modeled, what determines intradaily jumps and causes changes in intradaily volatility and what drives the premium of traded equity indexes? Are they induced, for example, by the information content of lagged volatility and return parameters or by macroeconomic news, changes in liquidity and volatility? Besides satisfying our intellectual curiosity, answers to these questions are of direct importance to investors developing trading strategies, policy makers evaluating macroeconomic policies and to arbitrageurs exploiting mispricing in exchange-traded funds. Results show that the leverage effect and lagged absolute returns improve forecasts of continuous components of daily realized volatility as well as jumps. Implied volatility does not subsume the information content of lagged returns in forecasting realized volatility and its components. The reported results are linked to the heterogeneous market hypothesis and demonstrate the validity of extending the hypothesis to returns. Depth shocks, signed order flow, the number of trades, and resiliency are the most important determinants of intradaily volatility. In contrast, spread shock and resiliency are predictive of signed intradaily jumps. There are fewer macroeconomic news announcement surprises that cause extreme price movements or jumps than those that elevate intradaily volatility. Finally, the premium of exchange-traded funds is significantly associated with momentum in net asset value and a number of liquidity parameters including the spread, traded volume, and illiquidity. The mispricing of industry exchange traded funds suggest that limits to arbitrage are driven by potential illiquidity.

Trial by media: An empirical investigation of corporate reputation and stock returns in Australia

This article examines whether investors are able to generate abnormal risk-adjusted returns in the Australian market based on media-specific firm reputational factors under market uncertainty between 2004 and 2012. The findings suggest that after controlling for crisis-centric time periods and market risk factors, contrarian trading strategies produce abnormal returns for poor corporate reputation firms but not for their good corporate reputation counterparts. Corporate reputation may be a driver of performance for poorly performing Australian firms and could be considered a stimulus for trading activity due to its explanatory capabilities.

Essays on momentum investing strategies

The momentum investment strategy, which buys recent winner stocks and sells recent loser stocks, earns returns that are simply too good to be explained by traditional finance theories. This thesis extends our understanding of the sources of momentum profits. The research shows that part of the seemingly anomalous returns can be explained by the market's reaction to public news, is affected by how delisting returns are calculated, and is biased by ignoring the time-varying risk of the trading strategy.

Co-branding strategies for luxury fashion brands : Missoni for Target

Missoni is a luxury Italian knitwear brand that partnered with Target in September 2011 releasing a large, one off, mass-market collection that ranged from apparel to home wares. The collaboration received extensive media coverage and was consequently extremely sought after. The online sales site crashed within hours of opening while shelves were cleared in stores minutes after trading began. Within hours more than 40000 items from the collection were posted for sale online at greatly inflated prices. Evaluation of the case study revealed that sales of the Missoni collection increased following the collaboration and the value of the publicity generated at estimated US$100 million. The lack of available stock, despite the enormous hype created, reinforced Missoni’s luxury image. Missoni was able to gain massive awareness of the brand despite not employing any of its own communication channels in the promotion of the collaboration. However the co-branded collaboration was distinctively Missoni, potentially inciting comparison and confusion with the signature line. Nevertheless, this study shows that co-branding strategies can offer a viable opportunity for luxury brands to increase their market share, while they maintain their market position.

Optimizing search strategies for invasive pests: Learn before you leap

Strategic searching for invasive pests presents a formidable challenge for conservation managers. Limited funding can necessitate choosing between surveying many sites cursorily, or focussing intensively on fewer sites. While existing knowledge may help to target more likely sites, e.g. with species distribution models (maps), this knowledge is not flawless and improving it also requires management investment. 2.In a rare example of trading-off action against knowledge gain, we combine search coverage and accuracy, and its future improvement, within a single optimisation framework. More specifically we examine under which circumstances managers should adopt one of two search-and-control strategies (cursory or focussed), and when they should divert funding to improving knowledge, making better predictive maps that benefit future searches. 3.We use a family of Receiver Operating Characteristic curves to reflect the quality of maps that direct search efforts. We demonstrate our framework by linking these to a logistic model of invasive spread such as that for the red imported fire ant Solenopsis invicta in south-east Queensland, Australia. 4.Cursory widespread searching is only optimal if the pest is already widespread or knowledge is poor, otherwise focussed searching exploiting the map is preferable. For longer management timeframes, eradication is more likely if funds are initially devoted to improving knowledge, even if this results in a short-term explosion of the pest population. 5.Synthesis and applications. By combining trade-offs between knowledge acquisition and utilization, managers can better focus - and justify - their spending to achieve optimal results in invasive control efforts. This framework can improve the efficiency of any ecological management that relies on predicting occurrence. © 2010 The Authors. Journal of Applied Ecology © 2010 British Ecological Society.

Ecosystem management along ephemeral rivers: Trading off socio-economic water supply and vegetation conservation under flood regime uncertainty

In ecosystems driven by water availability, plant community dynamics depend on complex interactions between vegetation, hydrology, and human water resources use. Along ephemeral rivers—where water availability is erratic—vegetation and people are particularly vulnerable to changes in each other's water use. Sensible management requires that water supply be maintained for people, while preserving ecosystem health. Meeting such requirements is challenging because of the unpredictable water availability. We applied information gap decision theory to an ecohydrological system model of the Kuiseb River environment in Namibia. Our aim was to identify the robustness of ecosystem and water management strategies to uncertainties in future flood regimes along ephemeral rivers. We evaluated the trade-offs between alternative performance criteria and their robustness to uncertainty to account for both (i) human demands for water supply and (ii) reducing the risk of species extinction caused by water mining. Increasing uncertainty of flood regime parameters reduced the performance under both objectives. Remarkably, the ecological objective (species coexistence) was more sensitive to uncertainty than the water supply objective. However, within each objective, the relative performance of different management strategies was insensitive to uncertainty. The ‘best’ management strategy was one that is tuned to the competitive species interactions in the Kuiseb environment. It regulates the biomass of the strongest competitor and, thus, at the same time decreases transpiration, thereby increasing groundwater storage and reducing pressure on less dominant species. This robust mutually acceptable strategy enables species persistence without markedly reducing the water supply for humans. This study emphasises the utility of ecohydrological models for resource management of water-controlled ecosystems. Although trade-offs were identified between alternative performance criteria and their robustness to uncertain future flood regimes, management strategies were identified that help to secure an ecologically sustainable water supply.

Embodied energy of service trading in Hong Kong

Purpose Energy is a resource of strategic importance for high density cities. International trade reshapes the urban economy and industrial structure of a city, which will indirectly affect energy use. As an international trade hub, Hong Kong relies on the import and export of services. Energy performance in the international trading of these services needs to be properly understood and assessed for Hong Kong’s urban renewal efforts. Design/methodology/approach This study evaluates Hong Kong’s embodied energy in service trades based on an input-output analysis. The three criteria used for assessment include trading areas, industry sector, and trade balance. Findings Analyzed by region, results show that Mainland China and the USA are the two largest sources of embodied energy in imports of services, while Mainland China and Japan are the two largest destinations of exports. In terms of net embodied energy transfer, Hong Kong mainly receives net energy import from Mainland China and the USA and supplies net energy export to Japan, the UK and Taiwan. Among industry sectors, Manufacturing services, Transport and Travel contribute most significantly to the embodied energy in Hong Kong’s imported services, while Transport and Travel contribute most to the energy embodied in exported services. Originality/value This study identifies the characteristics of energy consumption of service trading and establishes a feasible approach to analyze energy performance of service trade in energy-deficient Hong Kong for the first time. It provides necessary understanding and foundation for developing energy strategies in a service-based, high density urban economy.