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Article
Publication date: 1 June 1995

William N. Goetzmann

Two measures of informational efficiency are applied to the market for paintings. The first is a measure of market efficiency as captured by serial dependency in returns. The…

459

Abstract

Two measures of informational efficiency are applied to the market for paintings. The first is a measure of market efficiency as captured by serial dependency in returns. The serial correlation in an index of art returns suggests the possibility of persistent trends in the art market, however there is no empirical evidence that these trends can be easily exploited. The second is a measure of “price risk,” or instantaneous uncertainty about the immediate resale value of a work of art. The magnitude of the price risk suggests that there is a major role for dealers in the art market. Using historical data, I find that the price risk has been declining since the beginning of the painting market, indicating increasing informational efficiency. Paintings are like stocks and a dealer is like a broker. Someone makes money, then there is someone else who's really good at investing in stocks, and he tells the investor what to buy. If someone tells you to go to a good gallery rather than one that's not so good, you'll get a painting that might turn out to be worth something, a painting you like that's also a good investment. Its like having a broker tell you what stocks to buy. Andy Warhol

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Managerial Finance, vol. 21 no. 6
Type: Research Article
ISSN: 0307-4358

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Article
Publication date: 1 June 1995

William M. Taylor

It is found that one unit root, common trend is shared by the quarterly auction price series of five frequently auctioned types of stamps. The common trends analysis provides…

66

Abstract

It is found that one unit root, common trend is shared by the quarterly auction price series of five frequently auctioned types of stamps. The common trends analysis provides specific, stationary linear combinations, or cointegrating portfolios, of the auction price levels. The quarterly returns for the system of cointegrated auction prices can be represented by an error correction model using past returns and cointegrating vectors. There is evidence of a positive relationship between changes in the common trend and leading changes in industrial production

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Managerial Finance, vol. 21 no. 6
Type: Research Article
ISSN: 0307-4358

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Book part
Publication date: 2 December 2003

Stephen J. Brown, William N. Goetzmann, Takato Hiraki and Noriyoshi Shiraishi

The increased market share of foreign investment trusts in Japan may be attributed to the fact that Japanese managers have dramatically underperformed benchmarks. Recently, we…

Abstract

The increased market share of foreign investment trusts in Japan may be attributed to the fact that Japanese managers have dramatically underperformed benchmarks. Recently, we showed that this underperformance can be attributed to a unique Japanese tax environment. Using data from 1998 though 2001, we find that Japanese and foreign managers are becoming very similar in style and performance. However, Japanese managers suffered in the immediate aftermath of a major April 2000 revision in the tax code. We attribute this result to the huge inflow of new money into this sector and the style shifts necessary to accommodate this flow.

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The Japanese Finance: Corporate Finance and Capital Markets in ...
Type: Book
ISBN: 978-1-84950-246-7

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Article
Publication date: 1 July 1995

Steven J. Cochran and Robert H. DeFina

This study uses parametric hazard models to investigate duration dependence in US stock market cycles over the January 1929 through December 1992 period. Market cycles are…

76

Abstract

This study uses parametric hazard models to investigate duration dependence in US stock market cycles over the January 1929 through December 1992 period. Market cycles are determined using the Beveridge‐Nelson (1981) approach to the decomposition of economic time series. The results show that both real and nominal cycles exhibit positive duration dependence. The implication of this finding is that actual prices revert to their permanent or trend level in a non‐random manner as the cyclical component dissipates over time. This process is consistent with mean reversion in price and suggests that predictable periodicity in market cycles may exist. Only limited evidence is obtained that discrete shifts or trends in mean cycle duration exist. The length of market cycles appears not to have changed over the 1929–92 period.

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Managerial Finance, vol. 21 no. 7
Type: Research Article
ISSN: 0307-4358

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Book part
Publication date: 2 December 2003

Abstract

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The Japanese Finance: Corporate Finance and Capital Markets in ...
Type: Book
ISBN: 978-1-84950-246-7

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Book part
Publication date: 2 December 2003

Abstract

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The Japanese Finance: Corporate Finance and Capital Markets in ...
Type: Book
ISBN: 978-1-84950-246-7

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Book part
Publication date: 5 February 2019

Les Coleman

Abstract

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New Principles of Equity Investment
Type: Book
ISBN: 978-1-78973-063-0

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Book part
Publication date: 4 April 2005

Mirko Cardinale

The paper uses 101 years of Chilean and international financial assets returns to investigate mean-variance optimal portfolio allocations. The key conclusion is that the share of…

Abstract

The paper uses 101 years of Chilean and international financial assets returns to investigate mean-variance optimal portfolio allocations. The key conclusion is that the share of international unhedged investments is substantial even in minimum risk portfolios (20%), unless the period 1980–2002 is assumed to be drawn from a different distribution and previous history is disregarded. In addition to that, the paper finds that mean-variance optimal investors would have generated substantial demand for an asset replicating the return profile of an efficient pay-as-you-go pension scheme. Labour income and departures from log-normality of returns might, however, affect the latter conclusion.

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Latin American Financial Markets: Developments in Financial Innovations
Type: Book
ISBN: 978-1-84950-315-0

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Article
Publication date: 21 September 2011

Stephen Foerster

Behavioral researchers argue that although individuals often rely on heuristics or rules of thumb that reduce the complexity involved in predicting values, such heuristics can…

695

Abstract

Behavioral researchers argue that although individuals often rely on heuristics or rules of thumb that reduce the complexity involved in predicting values, such heuristics can lead to severe and systematic errors. I test this argument in an investment context by focusing on a simple heuristic whereby momentum traders are attracted to buying stocks that have recently doubled in price in anticipation of further gains. I show that such a strategy can lead to predictable disappointment for these investors and severe underperformance relative to the market (‐28% over a 4‐year period), whereas investors who avoid relying on this simple heuristic are likely to perform as expected, on average similar to the overall market. I also find that underperformance is more severe for stocks that have doubled faster. The “doubling” variable is a significant predictor of future price reversals in addition to past performance per se, as uncovered by the previous researchers.

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Review of Behavioural Finance, vol. 3 no. 2
Type: Research Article
ISSN: 1940-5979

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Article
Publication date: 15 January 2021

Ka Shing Cheung and Joshua Lee

Real estate is an asset that is traded in highly segmented, illiquid and informationally inefficient local markets. A short sale in real estate is almost infeasible and therefore…

590

Abstract

Purpose

Real estate is an asset that is traded in highly segmented, illiquid and informationally inefficient local markets. A short sale in real estate is almost infeasible and therefore impedes informed rational arbitrageurs to trade against mispricing. Thus, real estate returns are prone to sentiment-driven behaviours. Will the impacts on asset returns be identical for different types of sentiment?

Design/methodology/approach

This study argues that not all sentiment effects are created equal. Using the bounds test of the autoregressive distributed lag (ARDL) models, this paper examines how occupier sentiment versus investor sentiment contributes to the short-run and long-run dynamics of commercial real estate returns in Australia.

Findings

The empirical evidence suggests that investor sentiment and occupier sentiment influence return asymmetrically after macroeconomic conditions are controlled for.

Practical implications

The sectoral analysis further reveals that sector-specific sentiment plays a significant role in explaining commercial real estate returns. Furthermore, notable improvement is found in producing more accurate prediction in returns, given that measures of occupier and investor sentiment are appropriately specified in the forecast.

Originality/value

This study is novel in the sense that it acknowledges the impacts of occupiers' and investors' sentiment may be fundamentally different. The unique innovation and contribution of this study to behavioural finance literature are based on a new dataset from the Royal Institute of Chartered Surveyors which includes a survey-based measure of investor sentiment and occupier sentiment.

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