Earnings and Liquidity Factors

Abstract:  A model with factors for earnings, liquidity, their respective growth, and the market can offer a consumption rationale with low pricing error. It also subsumes one-year momentum and momentum net of reversal, the factor commonly known as ‘momentum.’ These earnings and liquidity factors are all significant and combine for a model without factor redundancy. […]

Comparing Anomalies Using Liquidity and Earnings

Abstract:  We compare three factor models and their ability to explain a set of portfolio anomalies. Two of these models are based on market capitalization which most of the industry currently uses to characterize stocks. We replace this line of thinking by utilizing both earnings and liquidity to construct a competing model, which is intuitive […]

A Network Value Theory of a Market, and Puzzles

Abstract: By considering the stock market as a network that impounds liquidity and information production, the authors were able to study its influence on aggregate stock value and value from dividends. Market participants and practitioners impart value through the network of activity they form. The authors offer a network value model that can price this […]

The Myth of The Monkey

Abstract: Professional asset managers are pilloried in the popular press, compared to dart boards and even to monkeys, and the literature often suggests they provide no economic value or are even a deadweight loss to the economy. But judging by compensation and the high number of people willing to undertake the work involved in entering […]

Estimating Winning Probabilities in Backgammon Races

Abstract: In modern backgammon, it is advantageous to know the chances each player has of winning, and to be able to compute the chances without the aid of calculators or pencil and paper. A simple model of backgammon is used to approximate those chances, and a readily computable and sufficiently accurate approximation of that is […]