Abstract

http://ssrn.com/abstract=2190437
 
 

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Stock Duration and Misvaluation


Martijn Cremers


University of Notre Dame

Ankur Pareek


Rutgers University

Zacharias Sautner


Frankfurt School of Finance & Management gemeinnützige GmbH

September 19, 2013


Abstract:     
We study whether the presence of short-term investors is related to stock prices using a new measure of stock holding duration. First, we find that holding durations have been stable and, if anything, slightly lengthened over time. Second, we document that the presence of short-term investors is related to temporary price distortions that generate stock return predictability, consistent with a speculative component in stock prices. As short-term investors move into (out of) stocks, their prices tend to go up (down) relative to fundamentals. As the presence of short-term investors is strongly mean-reverting, this creates a predictable pattern in returns.

Number of Pages in PDF File: 53

Keywords: Investor Horizon, Short-Termism, Mispricing, Speculative Bubbles

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Date posted: December 19, 2012 ; Last revised: September 19, 2013

Suggested Citation

Cremers, Martijn and Pareek, Ankur and Sautner, Zacharias, Stock Duration and Misvaluation (September 19, 2013). Available at SSRN: http://ssrn.com/abstract=2190437 or http://dx.doi.org/10.2139/ssrn.2190437

Contact Information

K. J. Martijn Cremers
University of Notre Dame ( email )
P.O. Box 399
Notre Dame, IN 46556-0399
United States
Ankur Pareek
Rutgers University ( email )
1 Washington Park
Newark, NJ 07102
United States
973-353-1646 (Phone)
Zacharias Sautner (Contact Author)
Frankfurt School of Finance & Management gemeinnützige GmbH ( email )
Sonnemannstraße 9-11
Frankfurt am Main, 60314
Germany
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