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Article

Abnormal Stock Returns Using Supply Chain Momentum and Operational Financials

Antti Paatela, Elias Noschis and Ari-Pekka Hameri
The Journal of Portfolio Management Winter 2017, 43 (2) 50-60; DOI: https://doi.org/10.3905/jpm.2017.43.2.050
Antti Paatela
is a visiting researcher in the Ecole des HEC at the University of Lausanne in Lausanne, Switzerland.
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  • For correspondence: antti.paatela@gmail.com
Elias Noschis
is a visiting researcher at the University of Lausanne in Lausanne, Switzerland.
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  • For correspondence: noschise@hotmail.com
Ari-Pekka Hameri
is a professor in the Ecole des HEC at the University of Lausanne in Lausanne, Switzerland.
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  • For correspondence: ahameri@unil.ch
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Abstract

Knowledge about a company’s supply chain provides an edge for investors. In this article, the authors propose a new trading approach in which a company’s stock is purchased only if its main customer’s quarterly sales evolve favorably. This method yields backtested annual returns in excess of 8.7% to the market return, net of real world transaction costs for a stock portfolio built on supply chain considerations. This portfolio is practically uncorrelated with the market, and the abnormal return is robust for risk adjustment. The method is applicable at least to U.S.-listed small- and mid-cap product-manufacturing companies with a strong dependency on their main customer company. According to the authors, a review of past publications could not identify research applying a similar method, thereby confirming the novelty of this fundamental facts-based approach.

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The Journal of Portfolio Management: 43 (2)
The Journal of Portfolio Management
Vol. 43, Issue 2
Winter 2017
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Abnormal Stock Returns Using Supply Chain Momentum and Operational Financials
Antti Paatela, Elias Noschis, Ari-Pekka Hameri
The Journal of Portfolio Management Jan 2017, 43 (2) 50-60; DOI: 10.3905/jpm.2017.43.2.050

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Abnormal Stock Returns Using Supply Chain Momentum and Operational Financials
Antti Paatela, Elias Noschis, Ari-Pekka Hameri
The Journal of Portfolio Management Jan 2017, 43 (2) 50-60; DOI: 10.3905/jpm.2017.43.2.050
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  • Article
    • Abstract
    • SUPPLY CHAIN KNOWLEDGE ASSISTED STOCK TRADING SO FAR
    • ANATOMY OF THE PROPOSED TRADING METHODOLOGY
    • THE PREDICTIVE POWER OF SUPPLY CHAIN FUNDAMENTALS
    • VALIDITY OF ABNORMAL RETURNS
    • BENEFITING FROM PRACTICAL IMPLEMENTATION OF SUPPLY CHAIN KNOWLEDGE
    • CONCLUSIONS
    • APPENDIX A
    • APPENDIX B
    • APPENDIX C
    • REFERENCES
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  • PDF (Subscribers Only)
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