Evaluating The Short-Term Excess-Return: A New Methodology

Volume: 2 Number: 4 December 1, 2013
  • Sharon Garyn Tal
Journal of Business Economics and Finance Cover
Journal of Business Economics and Finance
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Evaluating The Short-Term Excess-Return: A New Methodology

Abstract

In this paper, a new methodology for evaluating short-term excess return is suggested. The intuition behind this methodology is derived from the forward rate calculation and it does not require that the betas remain constant over time. The new methodology is compared with other short-term estimators and substantial score and ranking differences are found. In addition, the short-term estimators are analyzed based onaspects of expected value and variance and the conclusion is that the new methodology is the better one. Simulation tests support this result. Finally, the new methodology also yields performance scores and rankings that are the most consistent with their long-term counterparts.

Keywords

References

  1. Bauer, R., Cosemans, M. and Eichholtz, P. (2007), The performance and persistence of individual investors: rational agents or tulip maniacs? Working Paper (Maastricht University).
  2. Ben-Rephael, A., Kadan, O. and Wohl, A. (2010), The diminishing liquidity premium, Working Paper.
  3. Berk, J. B. and Green, R. C. (2004), Mutual fund flows and performance in rational markets, Journal of Political Economy, Vol. 112, pp. 1269-1295.
  4. Bollen, N. and Busse, J. A. (2005), Short-term persistence in mutual fund performance, Review of Financial Studies, Vol. 18, pp. 569-597.
  5. Brennan, M. J., Chordia, T. and Subrahmanyam, A. (1998), Alternative factor specifications, security characteristics and the cross-section of expected stock returns, Journal of Financial Economics, Vol. 49, pp. 345-373.
  6. Brennan, M. J., Chordia, T., Subrahmanyam, A. and Tong, Q. (2009), Sell-side illiquidity and the cross-section of expected stock returns, Working Paper.
  7. Brown, K. C., Harlow, W. V. and Starks, L. T. (1996), Of tournaments and temptations: an analysis of managerial incentives in the mutual fund industry, Journal of Finance, Vol. 51, pp. 85
  8. Brown, S. J. and Goetzmann, W. N. (1995), Performance persistence, Journal of Finance, Vol. 50, pp. 679-698.

Details

Primary Language

English

Subjects

-

Journal Section

-

Authors

Sharon Garyn Tal This is me

Publication Date

December 1, 2013

Submission Date

November 4, 2014

Acceptance Date

-

Published in Issue

Year 2013 Volume: 2 Number: 4

IZ

https://izlik.org/JA24PY42JH

Cite

RIS / Bibtex
APA
Tal, S. G. (2013). Evaluating The Short-Term Excess-Return: A New Methodology. Journal of Business Economics and Finance, 2(4), 101-127. https://izlik.org/JA24PY42JH
AMA
1.Tal SG. Evaluating The Short-Term Excess-Return: A New Methodology. JBEF. 2013;2(4):101-127. https://izlik.org/JA24PY42JH
Chicago
Tal, Sharon Garyn. 2013. “Evaluating The Short-Term Excess-Return: A New Methodology”. Journal of Business Economics and Finance 2 (4): 101-27. https://izlik.org/JA24PY42JH.
EndNote
Tal SG (December 1, 2013) Evaluating The Short-Term Excess-Return: A New Methodology. Journal of Business Economics and Finance 2 4 101–127.
IEEE
[1]S. G. Tal, “Evaluating The Short-Term Excess-Return: A New Methodology”, JBEF, vol. 2, no. 4, pp. 101–127, Dec. 2013, [Online]. Available: https://izlik.org/JA24PY42JH
ISNAD
Tal, Sharon Garyn. “Evaluating The Short-Term Excess-Return: A New Methodology”. Journal of Business Economics and Finance 2/4 (December 1, 2013): 101-127. https://izlik.org/JA24PY42JH.
JAMA
1.Tal SG. Evaluating The Short-Term Excess-Return: A New Methodology. JBEF. 2013;2:101–127.
MLA
Tal, Sharon Garyn. “Evaluating The Short-Term Excess-Return: A New Methodology”. Journal of Business Economics and Finance, vol. 2, no. 4, Dec. 2013, pp. 101-27, https://izlik.org/JA24PY42JH.
Vancouver
1.Sharon Garyn Tal. Evaluating The Short-Term Excess-Return: A New Methodology. JBEF [Internet]. 2013 Dec. 1;2(4):101-27. Available from: https://izlik.org/JA24PY42JH

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