Industries and Stock Return Reversals

摘要: This paper documents pervasive evidence of intra-industry reversals in monthly returns. Unlike the conventional reversal strategy based on stock returns relative to market portfolio, we document return that are larger magnitude, consistently present over time, and prevalent across subgroups stocks, including large liquid stocks. These driven by order imbalances noninformational shocks. Consistent with representing compensation for supplying liquidity, stronger following aggregate declines volatile times, reflecting binding capital constraints limited risk-bearing capacity liquidity providers.