Value and momentum from investors’ perspective: Evidence from professionals’ risk-ratings

Christoph Merkle and Christoph J. Sextroh

Journal of Empirical Finance, 2021, vol. 62, issue C, 159-178

Abstract: We conduct a controlled experiment with financial professionals to examine more directly whether value and momentum reflect risk factors or mispricing. By eliciting their risk perceptions and return expectations for company stocks, we identify what constitutes a risky investment from the point of investors. Contrary to the risk factor hypothesis, value and momentum stocks are regarded as less risky. However, other factors, such as size and beta, fall in line with their traditional interpretation as risk factors. Consistent with empirical findings, we observe higher return expectations for momentum stocks, raising questions on analysts believing in a risk–return trade-off.

Keywords: Value; Momentum; Risk factor; Anomaly; Financial analysts (search for similar items in EconPapers)
JEL-codes: D84 G11 G12 G40 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:empfin:v:62:y:2021:i:c:p:159-178

DOI: 10.1016/j.jempfin.2021.03.004

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