English, Article, Journal or magazine article edition: Commonality in Misvaluation, Equity Financing, and the Cross Section of Stock Returns Hirshleifer, David; Jiang, Danling

User activity

Share to:
 
Bookmark: http://trove.nla.gov.au/version/168548
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Commonality in Misvaluation, Equity Financing, and the Cross Section of Stock Returns
Author
  • Hirshleifer, David
  • Jiang, Danling
Physical Description
  • preprint
Notes
  • Behavioral theories suggest that investor misperceptions and market mispricing will be correlated across firms. This paper uses equity financing to identify comovement in returns and commonality in misvaluation. After new equity issues (repurchases), firms comove more with existing issuers (repurchasers). A zero-investment portfolio (UMO, Undervalued Minus Overvalued) built from repurchase and new issue stocks captures excess comovement in general stock returns relative to the 4-factor model and makes the alphas of the extreme size and book-to-market portfolios insignificant. The loadings on UMO incrementally predict the cross-section of returns. Further evidence is consistent with the UMO loading proxying for the common component of a stock's misvaluation.
  • RePEc:pra:mprapa:5618
  • Behavioral theories suggest that investor misperceptions and market mispricing will be correlated across firms. This paper uses equity financing to identify comovement in returns and commonality in misvaluation. A zero-investment portfolio (UMO, Undervalued Minus Overvalued) built from repurchase and new issue stocks captures excess comovement in general stock returns relative to a set of multi-factor models. Adding UMO to the 3-factors makes the alphas insignificant for portfolios with extreme size and book-to-market, or based on M&​A, convertible bond issuance, and dividend initiation, resumption, and omission. The loadings on UMO incrementally predict the cross-section of returns on portfolios as well as individual stocks. Further evidence is consistent with the UMO loading proxying for the common component of a stock's misvaluation.
  • Comovement; equity financing; new issue; repurchase; systematic mispricing; return predictability
  • RePEc:pra:mprapa:16134
Language
  • English
Contributed by
OAIster

Get this edition

  • Set up My libraries

    How do I set up "My libraries"?

    In order to set up a list of libraries that you have access to, you must first login or sign up. Then set up a personal list of libraries from your profile page by clicking on your user name at the top right of any screen.

  • All (1)
  • Unknown (1)
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.

User activity


e.g. test cricket, Perth (WA), "Parkes, Henry"

Separate different tags with a comma. To include a comma in your tag, surround the tag with double quotes.

Be the first to add a tag for this edition

Be the first to add this to a list

Comments and reviews

What are comments? Add a comment

No user comments or reviews for this version

Add a comment