Panel A lists the close-to-close returns of the momentum strategy. As discussed above, close-to-close return equals the sum of the overnight return and the intraday return. Momentum seems to show up in close-to-close returns. Panel B shows the main result of this paper: Almost ALL of the abnormal returns in the momentum strategy are generated overnight, rather than intraday.
Category: Economics
The NYTimes Could Be Worth $19bn Instead Of $2bn
Frédéric Filloux :
Through this lens, if Wall Street could assign to The New York Times the ratio Silicon Valley grants BuzzFeed (8.5 instead of a paltry 1.4), the Times would be worth about $19bn instead of the current $2.2bn.
Again, there is no doubt that Wall Street would respond enthusiastically to a major shrinkage of NYTCo’s print operations; but regardless of the drag caused by the newspaper itself, the valuation gap is absurdly wide when considering that 75% of BuzzFeed traffic is actually controlled by Facebook, certainly not the most reliably unselfish partner.
While BuzzFeed relies on ridiculous headlines and traffic from Facebook, investors are more inclined to value BuzzFeed way higher than the Times because of the potential it can generate in the future.
On the other hand, the Times is a safe-house, which proved to be realistic 5-7 years ago by transitioning into a successful digital brand. So all in all, the growth of Times is less tangible than a relatively new website. That’s precisely why there’s such a gap between the two. Though to be perfectly realistic, considering that one is kinda overvalued and the other one undervalued (in Silicon Valley standard) these two ratios should adjust and get closer together.
Games People Play
Monthly Investment Outlook from Bill Gross :
Good players know that it is critical to move quickly around the board, make acquisitions and then develop the properties by creating hotels. Three hotels on each property are desirable and of course as every Monopoly pro knows, it’s not Boardwalk or Park Place that are the key holdings but the Oranges and the Reds. Same thing in reality’s markets, I would suggest. Which companies and which investments to overweight and how much leverage to use usually point to the eventual winners. But an ample amount of cash is important as well as you land on other owners’ properties. You need liquidity to pay rent or service debt – otherwise you sell assets at a discounted price and are swiftly out of the game. That reminds me of Lehman Brothers and its aftermath. Early in Monopoly, property is king but later in the game, cash becomes king and those without cash and the ability to get it go bankrupt.
Creative Destruction in Russia and America: The Case of Energy
An alternative explanation for the oil glut is that technical change was initiated by profit-motivated private companies for whom a price decrease was not part of their intention. They may have had no intention to hurt producers and help consumers. Other producers followed the innovators and adopted the new technology. The resulting competitive process is an example of Creative Destruction that produced net gains for the world economy, while simultaneously harming incumbent producers. Adam Smith’s famous description of the motives of a businessman is applicable: “.. he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention”.
Why Are Commodity Prices Falling ?
In fact, there are four channels through which the real interest rate affects real commodity prices (aside from whatever effect it has via the level of economic activity).
First, high interest rates reduce the price of storable commodities by increasing the incentive for extraction today rather than tomorrow, thereby boosting the pace at which oil is pumped, gold is mined, or forests are logged.
Second, high rates also decrease firms’ desire to carry inventories (think of oil held in tanks).
Third, portfolio managers respond to a rise in interest rates by shifting out of commodity contracts (which are now an “asset class”) and into treasury bills.
Finally, high interest rates strengthen the domestic currency, thereby reducing the price of internationally traded commodities in domestic terms (even if the price has not fallen in foreign-currency terms).
