Year: 2002
Type: article
Abstract: We 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 short-sales 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, we 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%.
Source: Journal of Financial Economics
Authors: Joseph Chen, Harrison Hong, Jeremy C. Stein
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W3123342491