We measure misvaluation using the discounted residual income model of Ohlson (1990, 1995). We show that there are significant returns on a long-short portfolio that buys under- and sells short overvalued shares. These returns are highly correlated with the Fama and French HML factor returns and...

We measure misvaluation using the discounted residual income model. Confirming the findings in the literature, we show that there are significant returns on a misvaluation based long-short portfolio that buys under- and sells short overvalued shares. We define misvaluation spread as the...

Regressing hedge funds' returns on returns to a long-short contrarian trading strategy, a measure of the returns from providing liquidity, we find that hedge funds typically supply liquidity in the stock market. In the cross-section, strict redemption restrictions and large fund size increase...