Gokhan Sonaer

Market share growth and stock returns

We find a negative relationship between market share growth and subsequent stock returns, three‐ and four‐factor alphas. We report the potential explanatory role of market share growth in explaining subsequent average monthly stock returns. High (Low) market share growth firms report good (poor) operating performance and positive (negative) SUEs in the quarter in which market share growth is measured and investors overact to that good (bad) news. However, high (low) market share growth firms experience decrease (increase) in operating performance and SUEs in the subsequent quarters resulting in corrections in investors’ expectations and subsequent lower (higher) stock returns.

Herding by mutual funds: impact on performance and investors’ response†

ABSTRACT In this paper we investigate whether herding by actively managed equity funds affects their performances and flows over the 1980–2013 period. We show that during the herding quarter, on average, funds that trade with the herd benefit from this behavior. Although this does not directly translate into a positive association between the extent to which funds herd and their subsequent performance, we find that the funds that follow the herd earn negative abnormal returns whereas the ones that lead earn no abnormal returns. Our results also indicate that investors react adversely to follower funds while they are neutral towards the leader funds.

Executive compensation and product market behaviour

There is little empirical evidence on the effect of a CEO’s incentive compensation on the firm’s product market behaviour. This article reports that performance (risk)-based incentive compensation delta (vega) of a firm’s CEO positively affects its industry-adjusted sales growth (proxy for product market behaviour).