search query: @indexterm Prediction theory / total: 137
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| Author: | Chen, J. Hong, H. Stein, J. C. |
| Title: | Breadth of ownership and stock returns |
| Journal: | Journal of Financial Economics
2002 : DEC, VOL. 66:2-3, p. 171-205 |
| Index terms: | Stock returns Share ownership Prediction theory |
| Freeterms: | Short sale constraints Return predictability |
| Language: | eng |
| Abstract: | The authors develop a stock market model with differences of opinion and short-sales constraints. When breadth is low - i.e., when few investors have long positions - this signals that the shortsales constraint is binding tightly, and that prices are high relative to fundamentals. Thus reductions in breadth should forecast lower returns. Using data on mutual fund holdings, they find that stocks whose change in breadth in the prior quarter is in the lowest decile of the sample underperform those in the top decile by 6.38 % in the twelve months after formation. Adjusting for size, book-to-market, and momentum, the figure is 4.95%. |
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