Slow-Moving Capital and Stock Returns

Download or read book Slow-Moving Capital and Stock Returns written by Sergey Isaenko and published by . This book was released on 2019 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies the effects that delays in capital allocations in the stock market and high short-term trading incentives have on returns of this market. We report that capital inertia makes the Sharpe ratio and the volatility of the stock returns many times higher than in an economy with no capital delays. Furthermore, in agreement with empirical literature, the stock price displays short-term overreaction and high volatility of the conditional Sharpe ratio.