G 5 years sp index effect stocks generally tend to

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Unformatted text preview: New-issue puzzle Although new stock issues generally tend to be underpriced, the initial capital gain often turns into losses over longer periods of e.g. 5 years. S&P-Index effect Stocks generally tend to rise immediately after being added to an index (e.g. S&P 500, where the index effect was originally documented) Weekend effect Smallcap stocks have historically tended to rise on Fridays and fall on Mondays, perhaps because sellers are afraid to hold short positions in risky stocks over the weekend, so they buy back and re-initiate. While the existence of these anomalies is well accepted, the question of whether investors can exploit them to earn superior returns in the future is subject to debate. Investors evaluating anomalies should keep in mind that although they have existed historically, there is no guarantee they will persist in the future. Moreover, there seem to be a tendency that anomalies disappear as soon as the academic papers discovering them get published. 7.2 Behavioural finance Beh...
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This note was uploaded on 10/26/2012 for the course 19 19 taught by Professor - during the Spring '12 term at Sunway University College.

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