RBS Professor Awarded Best Paper Award in Top-level International Conference

In February, 2017, FMA Latin America Conference was held in Mexico. RBS Department of Finance and Economics Professor Zheng Lingling and distinguished visiting professor, Dean of RBS Department of Finance and Economics, Professor Yan Xuemin graduated from University of Missouri published Fundamental Analysis and the Cross-section of Stock Returns: A Data-mining Approach together on Review of Financial Studies and were awarded Best Paper Award.

Data-mining concern arises because “the more scrutiny a collection of data is subjected to, the more likely will interesting patterns emerge” (Lo and Mackinlay 1990, 432). Although researchers have long recognized the potential danger of data mining, few studies have examined its impact on a broad set of cross-sectional stock return anomalies.1 The lack of research in this area is in part because of the difficulty to account for all the anomaly variables that have been considered by researchers. Although one can easily identify published variables, one cannot observe the numerous variables that have been tried but not published or reported due to the “publication bias.”2 In this paper, they overcome this challenge by examining a large and important class of anomaly variables that are derived from financial statements (what we call “fundamental-based variables”), for which a “universe” can be reasonably constructed. They focus on fundamental-based variables for several reasons. First, many prominent anomalies such as the asset growth anomaly (Cooper, Gulen, and Schill 2008) and the gross profitability anomaly (Novy-Marx 2013) are based on financial statement variables. Harvey, Liu, and Zhu (2016) report that accounting variables represent the largest group among all the published crosssectional return predictors.

This paper was officially published on Review of Financial Studies in April 2017 and won wide attention and praise from the academic field. The two writers have already announced their research findings on several important international finance conferences, including CICF in 2016, EFA, FMA European Conference and SGF in 2016 and FMA Latin America in 2017, etc. At the same time, Professor Yan Xuemin was awarded Winemiller Excellence Award by University of Missouri of America in March 2017 due to the his contribution in quantitative analysis methods in this paper.

Moreover, this paper attracted extensive attention from the financial industry. So far, the writers have received invitation from famous fund companies in America to demonstrate their research findings and discuss the paper’s practical value of application in the companies’ internal meetings.