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Determinants of stock returns: Factors or systematic co-moments? Crisis versus non-crisis periods

journal contribution
posted on 2014-01-01, 00:00 authored by C H Hung, Sohel AzadSohel Azad, Victor Fang
In this paper we evaluate the intertemporal pricing performance of stock return determinants over the periods surrounding, and outside of, financial crises. The analysis focuses on the variables of size, book-to-market ratio, momentum, liquidity, and higher-order systematic co-moments. The evidence reveals that over non-crisis periods the market beta plays an important role in determining the cross-section of stock returns. Size, value, momentum, and liquidity also exhibit associations with the cross-section of stock returns. However, over crisis periods most of the variables we examined lose their explanatory power, suggesting that their usefulness is limited for investment purposes when financial markets experience crises. There is some evidence of coskewness pricing surrounding market crashes. Practitioners may consider coskewness over crisis periods.

History

Journal

Journal of international financial markets, institutions & money

Volume

31

Pagination

14 - 29

Publisher

Elsevier

Location

Amsterdam, The Netherlands

ISSN

1042-4431

Language

eng

Publication classification

C1 Refereed article in a scholarly journal

Copyright notice

2014, Elsevier

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