Holiday Season
time to be thankful for everything that fortune has bestowed on us
Its funny how once you have kids your schedule mostly revolves around theirs’. October is an odd time to go on a vacation but who is going to argue with school Dasara holidays? All this to say, spent the last week in Bali and haven’t much to write about :)
Markets this Week
India
US
Commodities
Links
Research
Momentum, Market Volatility, and Reversal (SSRN)
Momentum profits collapse and reversal occurs when preceding market volatility is relatively high. Based on these intertemporal patterns, we implement an investment strategy that switches from momentum to reversal when volatility is high.
Peer Option Momentum (SSRN)
We document option momentum spillovers across peer firms with shared analyst coverage. Firms whose peers have higher past-12-month delta-hedged straddle returns tend to have higher future option returns. Past option returns of a firm's peers can predict the firm's realized variance even after we control the firm's option-implied variance and its own past option returns. In addition, peer momentum is stronger for indirect linkages. The findings are consistent with limited investor attention on volatility information from peer firms. Compared with peer stock momentum, peer option momentum persists longer and exhibits spillovers via more economic linkages that cannot be subsumed by analyst-based linkages.
Unveiling the Role of Short-Selling Frictions in Cross-Sectional Momentum (SSRN)
We investigate the impact of short-selling constraints on the cross-sectional momentum effect (CME), unveiling four key findings. First, the CME has nearly vanished after 2000, as short-selling capacity increased. Second, conditioning on short-selling information, the CME remains highly significant for the most constrained stocks. Third, the negative correlation between firm size and momentum, primarily arises from difficulties in short-selling small stocks, especially winners, challenging the "gradual information-diffusion" model. Fourth, we document the predictive role of aggregate sentiment, particularly for losers.
Investing
The Playing Field (grahamduncan)
India
Growth in India's manufacturing industry cooled to an eight-month low in September with the HSBC final India Manufacturing Purchasing Managers' Index falling to 56.5 from 57.5 in August (reuters)
SEBI tightened the rules for equity derivatives trading, raising the entry barrier and making it more costly to trade in the asset class. (reuters)
India's Jio Financial, BlackRock get in-principle approval to set up mutual fund business (reuters)
SEBI has introduced guidelines that will change how securities are credited to investors’ demat accounts. Currently, securities are credited to the broker, who then transfers them to the investor. Under new rules, securities will be directly credited to the investor’s demat account, making the process more efficient. (zerodha)
RoW
Imposing tariffs on Chinese EVs is unlikely to rescue Europe's auto industry from its current challenges. (siliconcontinent)
Lack of competitiveness is a natural outcome of not having to compete: US shipyards (cato)
In global game of influence, China turns to a cheap and effective tool: fake news (apnews)
Russian companies have established a barter trade system with Pakistan to facilitate economic exchanges without the need for monetary transactions (themoscowtimes)
The trials and tribulations of IBM over the ages: Part 1, Part 2, Part 3.
How Intel's $108 billion buyback gambit backfired (calcalistech)
Americans lost $5.6 billion last year in cryptocurrency fraud scams (apnews)
Odds & Ends
Twenty years of microplastics pollution research—what have we learned? (science)
HPV vaccine study finds zero cases of cervical cancer among women vaccinated before age 14 (statnews)
Scores of papers by Eliezer Masliah, prominent neuroscientist and top NIH official, fall under suspicion (science)
TikTok and Instagram are intellectual poison (hottakes)
Meme of the Week
