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on Financial Markets |
| By: | Yartseva, Anna |
| Abstract: | Hot growth stocks attract substantial interest from investors; however, future stock market winners are difficult to identify using traditional metrics of fundamental analysis (such as cash flow, profitability or earnings per share). This study investigates the characteristics of “multibagger stocks” – stocks that increase in value several times the original investment – and detects key drivers of their abnormal investment returns. An empirical analysis of 464 multibagger stocks listed on major American stock exchanges, each increasing in value by at least tenfold during 2009-2024, was conducted. A dynamic panel data model was developed to explain the sources of their outperformance and to predict future returns. The findings indicate that several traditional Fama-French factors, including size, value and profitability, remain significant predictors of future multibagger returns: small-cap high-value high-profitability stocks outperform. Additionally, the analysis identifies further important drivers of multibagger stock outperformance. These include fundamental, technical, and macroeconomic variables, such as high free cash flow yield, distinctive investment patterns linked to EBITDA growth, complex momentum effects with quick trend reversals that limit optimal entry points, and specific interest rate environment. This study advances asset pricing research by developing a novel, empirically validated model to explain the multibagger phenomenon. It offers valuable practical insights for investors and asset managers and provides a robust theoretical foundation for future stock screening strategies aimed at identifying potential multibaggers and maximising capital gains. |
| Keywords: | asset pricing; growth stocks; multibagger stocks; stock market outperformance; stock returns modelling; beating the market; Fama-French model; factor models; predictive modelling; investment strategies; financial economics |
| Date: | 2025–02–23 |
| URL: | https://d.repec.org/n?u=RePEc:akf:cafewp:33 |
| By: | Michele Modugno; Berardino Palazzo |
| Abstract: | The equity market’s reaction to macroeconomic news is consistent with the propagation of news into the real economy. We embody all the macro news in an activity news index and a price news index that together explain 34% of the quarterly stock price returns variation. When those indexes capture a stream of favorable macroeconomic surprises, publicly traded firms experience increases in revenues, profitability, financing, and investment activities. The firm-level resultslead up to an expansion of the real side of the whole U.S. economy. Our findings, taken together, show that stock prices’ reactions to macro news have a strong association with firm-level and economy-wide growth. |
| Keywords: | Macroeconomic News; Equity Markets; Real Activity |
| JEL: | E44 E47 G14 |
| Date: | 2025–01–17 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedgfe:2025-07 |
| By: | António Afonso; José Alves; Wojciech Grabowski; Sofia Monteiro |
| Abstract: | We employ a cross-quantilogram approach to assess relationships between quantiles of stock returns and sovereign yields, in the U.S. and Germany, in the period 1990-2024. Specifically, we focus on the lowest 5% quantile of stock returns and the highest 5% quantile of bond returns, providing insights into tail dependencies, crucial during market downturns and periods of heightened volatility. We also measure causality in volatilities extending well-known approaches analyzing volatility transmission. We find significant cross-market relationships between U.S. and German stock and bond markets, influenced by economic crises, macroeconomic dynamics, and monetary policy interventions, and financial stress play a crucial role. |
| Keywords: | stock returns, sovereign bond returns, stock-bond relationship, cross-quantilogram, volatility transmission, US, Germany, monetary policy shocks, fiscal stance |
| JEL: | C32 F21 F37 F42 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11667 |
| By: | Phoebe Koundouri; Conrad Landis; Nikitas Pittis (University of Piraeus, Greece) |
| Abstract: | This study investigates the relationship between Environmental, Social, and Governance (ESG) momentum and Sustainable Development Goals (SDG) integration within international equity markets. Leveraging a robust dataset spanning 2002-2023, we identify pronounced ESG momentum effects in stock returns across 63 global markets. Our ESG momentum factor, derived through monthly rebalancing, demonstrates an impressive, annualized Sharpe ratio of 0.7, underscoring its financial viability. Beyond returns, the study highlights the pivotal role of ESG controversies in shaping short-term financial performance. We advanced the discourse by integrating ESG principles with the SDG framework, proposing a novel model to calculate the SDG footprint of financial portfolios. This alignment between ESG momentum and SDG implementation emerges as a significant tool for investors and policymakers, particularly considering regulatory advancements like the Corporate Sustainability Reporting Directive (CSRD). |
| Date: | 2025–02–07 |
| URL: | https://d.repec.org/n?u=RePEc:aue:wpaper:2523 |
| By: | Salil Gadgil |
| Abstract: | This paper studies how regulation implemented after the Global Financial Crisis has impacted price discovery in the credit default swap market (Working Paper no. 24-04). |
| Date: | 2024–07–17 |
| URL: | https://d.repec.org/n?u=RePEc:ofr:wpaper:24-04 |
| By: | Petre Caraiani (Bucharest University of Economic Studies and Institute for Economic Forecasting, Romanian Academy, Romania); Onur Polat (Department of Public Finance, Bilecik Seyh Edebali University, Bilecik, Turkiye); Rangan Gupta (Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa); Elie Bouri (Corresponding author. School of Business, Lebanese American University, Lebanon) |
| Abstract: | In this paper, we relate physical and transition climate risks of the United States (US) to systemic risk of its banking sector. We start by estimating the systemic risk of 128 bank stock prices of the US over the period 26th May 2008 to 30th June 2023, taking the time-varying financial risk meter (FRM) approach, which relies on the Lasso quantile regression model. The FRM for the overall system of banks, as well as for large, medium, and small banks separately, exhibits notable peaks during COVID-19 in particular, and the global financial and European sovereign debt crises. Subsequently, using a nonparametric causality-in-quantiles test, which is robust to misspecification due to nonlinearity and structural breaks, we show that news-based metrics of physical and transition risks can significantly predict the entire conditional distribution of the FRMs over the full-sample and in a time-varying manner, with strongest causal impacts derived from news on international summits, compared to those on natural disasters, global warming, and US climate policies. Further analysis shows that all four climate risk factors consistently exert a positive impact on the conditional quantiles of the FRMs, supporting the premise that climate risks can damage assets and augment operating costs in the banking sector. Our findings have important policy implications which concern the stability of the banking sector. |
| Keywords: | US bank stocks, financial risk meter (FRM), climate risks, nonparametric causality-in-quantiles test, predictability |
| JEL: | C21 C22 G21 Q54 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:pre:wpaper:202507 |