Ownership · Cremers and Nair (2005)

Blockholder Activism

Institutional ownership of a firm's largest blockholder, kept only when that stake exceeds 5% and the governance index is 5 or below (weak takeover defenses). Long high minus short low quintile portfolio of stocks above the NYSE 20th size percentile, value-weighted, re-sorted monthly, hedged each month with a rolling 5-year market beta from prior months only (β = 0.24 at the end of the sample). Quarterly, 1993Q4 to 2006Q4.

Predicted alphareturn · posterior mean, % per year, averaged over the window

Next quarter

2027Q1

3.53%

95% interval −7.67% to 14.15%

Next year

2027Q1–2027Q4

3.53%

95% interval −7.70% to 14.16%

Next five years

2027Q1–2031Q4

3.50%

95% interval −7.81% to 14.19%

Forecast made 1 Oct 2026, conditioning on this portfolio's returns, which end 2006Q4 with Open Source Asset Pricing's data for the signal (Activism2). The 80 quarters between then and 2027Q1 are unobserved and are integrated out under the model.

Portfolio

Market hedge

Prior beliefsDefault

Half life of shocks to the edge

Long-run performance

Time variation in risk-adjusted returns

Quintile and decile portfolios are sorted each month over common stocks on the NYSE, AMEX and Nasdaq whose market value is above the NYSE 20th percentile, with breakpoints computed over those same stocks, so every signal is measured on one universe. Original paper is Open Source Asset Pricing's replication of the paper's own portfolio, with its sort, weighting, stock screens and rebalancing.

Cumulative market-hedged returnreturn, unhedged

+80% since 1993Q4 · log scale

Past performance, annualized

Window	AlphaReturn	Vol.	Info. ratioSharpe ratio	t-stat
1993Q4–2006Q4	6.59%	21.43%	0.31	1.12
2002Q1–2006Q4	11.40%	14.86%	0.77	1.71
2006Q1–2006Q4	−7.00%	13.19%	−0.53	−0.53
1993Q4–2006Q4	2.94%	9.82%	0.30	1.09
2002Q1–2006Q4	3.26%	9.22%	0.35	0.79
2006Q1–2006Q4	4.82%	7.77%	0.62	0.62
1993Q4–2006Q4	3.50%	18.23%	0.19	0.70
2002Q1–2006Q4	10.33%	11.99%	0.86	1.93
2006Q1–2006Q4	−5.52%	12.53%	−0.44	−0.44
1990Q4–2006Q4	9.04%	19.73%	0.46	1.85
2002Q1–2006Q4	11.25%	14.36%	0.78	1.75
2006Q1–2006Q4	−4.61%	12.80%	−0.36	−0.36
1990Q4–2006Q4	3.84%	10.17%	0.38	1.52
2002Q1–2006Q4	3.23%	9.18%	0.35	0.79
2006Q1–2006Q4	5.56%	7.92%	0.70	0.70
1990Q4–2006Q4	6.89%	16.98%	0.41	1.64
2002Q1–2006Q4	9.88%	11.19%	0.88	1.98
2006Q1–2006Q4	−3.94%	11.92%	−0.33	−0.33
1990Q4–2006Q4	9.32%	19.72%	0.47	1.91
2002Q1–2006Q4	11.42%	14.39%	0.79	1.77
2006Q1–2006Q4	−4.31%	12.82%	−0.34	−0.34
1990Q4–2006Q4	5.65%	10.18%	0.55	2.24
2002Q1–2006Q4	4.36%	9.31%	0.47	1.05
2006Q1–2006Q4	7.56%	7.96%	0.95	0.95
1990Q4–2006Q4	6.93%	16.98%	0.41	1.64
2002Q1–2006Q4	9.90%	11.19%	0.88	1.98
2006Q1–2006Q4	−3.90%	11.92%	−0.33	−0.33

Forecast information ratioSharpe ratio, annualized

Window	Mean	95% interval	P(neg)
2027Q1	0.16	−0.36 – 0.66	0.26
2027Q1–2027Q4	0.16	−0.33 – 0.64	0.26
2027Q1–2031Q4	0.15	−0.28 – 0.59	0.26
Prior changed from site default.
2027Q1	0.16	−0.36 – 0.66	0.26
2027Q1–2027Q4	0.15	−0.33 – 0.63	0.26
2027Q1–2031Q4	0.14	−0.28 – 0.58	0.27
Prior changed from site default.
2027Q1	0.11	−0.40 – 0.61	0.33
2027Q1–2027Q4	0.10	−0.37 – 0.58	0.33
2027Q1–2031Q4	0.09	−0.32 – 0.52	0.33
Prior changed from site default.
2027Q1	0.27	−0.23 – 0.74	0.13
2027Q1–2027Q4	0.27	−0.22 – 0.72	0.13
2027Q1–2031Q4	0.24	−0.18 – 0.69	0.13
Prior changed from site default.
2027Q1	0.23	−0.28 – 0.71	0.18
2027Q1–2027Q4	0.22	−0.25 – 0.67	0.18
2027Q1–2031Q4	0.19	−0.21 – 0.62	0.18
Prior changed from site default.
2027Q1	0.25	−0.25 – 0.72	0.15
2027Q1–2027Q4	0.24	−0.23 – 0.69	0.15
2027Q1–2031Q4	0.22	−0.19 – 0.65	0.15
Prior changed from site default.
2027Q1	0.28	−0.23 – 0.75	0.12
2027Q1–2027Q4	0.27	−0.21 – 0.73	0.13
2027Q1–2031Q4	0.25	−0.17 – 0.70	0.13
Prior changed from site default.
2027Q1	0.34	−0.19 – 0.81	0.10
2027Q1–2027Q4	0.32	−0.17 – 0.79	0.10
2027Q1–2031Q4	0.29	−0.14 – 0.75	0.10
Prior changed from site default.
2027Q1	0.25	−0.25 – 0.72	0.15
2027Q1–2027Q4	0.24	−0.23 – 0.69	0.15
2027Q1–2031Q4	0.22	−0.19 – 0.66	0.15
Prior changed from site default.