Buy the Rumor, Short the News

I am a big fan of David Einhorn (haven’t yet had the chance to read his book), so I was glad to see the videos Barry posted on his site. Einhorn has a website here for his new book as well.


From an article at HedgeWeek on the foreign listed funds:

Why this sudden explosion of IPOs? One reason is easing of the rules for listing on the London Stock Exchange’s Main Market, including a provision allowing dual listings. But mostly fund IPOs are becoming an attractive route for managers to increase assets and diversify their revenue streams.

With increased competition and global uncertainty, a listed vehicle is a good way to capture investor interest. As one hedge fund manager puts it: ‘It is basically a move toward permanent capital.’

The fact that many funds are following the IPO route is an indication that investor interest is out there, which goes to show that even in the current investment climate, well-founded IPOs will attract solid support.


Mike Zarren 2, LeBron James 0


An article in the Times by Mark Hulbert, Report Earnings and Watch the Stock Fall, profiles the following paper:

Limited Attention and the Earnings Announcement Returns of Past Stock Market Winners by Aboody, Lehavy, and Trueman

We document that stocks with the strongest prior 12-month returns experience a significant average market-adjusted return of 1.58 percent during the five trading days before their earnings announcements and a significant average market-adjusted return of -1.86 percent in the five trading days afterward. These returns remain significant even after accounting for transactions costs. We empirically test two possible explanations for these anomalous returns. The first is that unexpectedly positive news hits the market over the few days prior to these firms’ earnings announcements, and that unexpectedly negative news comes out just afterwards. The second possibility is that stocks with sharp run-ups tend to attract individual investors’ attention, and investment dollars, particularly before their earnings announcements. We do not find evidence for an information-based explanation; however, our analysis suggests the possibility that the trading decisions of individual investors are at least partly responsible for the return pattern we observe.