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

Chi-Hsiou Hung (), A.S.M. Azad and Victor Fang

Journal of International Financial Markets, Institutions and Money, 2014, vol. 31, issue C, 14-29

Abstract: 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.

Keywords: Systematic co-moment; Size; Value; Momentum; Liquidity (search for similar items in EconPapers)
JEL-codes: G11 G12 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:31:y:2014:i:c:p:14-29

DOI: 10.1016/j.intfin.2014.03.005

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