Size, value, and momentum in developed country equity returns: Macroeconomic and liquidity exposures

Nusret Cakici and Sinan Tan

Journal of International Money and Finance, 2014, vol. 44, issue C, 179-209

Abstract: The paper investigates value and momentum factors in 23 developed international stock markets. We find that typically value and momentum premia are smaller and more negatively correlated for large market capitalization stocks relative to small. Momentum factors are more highly correlated internationally relative to value. We provide international evidence on three sets of risk exposures of value and momentum returns: macroeconomic risk, funding liquidity risk, and stock market liquidity risk. We find that value returns are typically lower prior to a recession while momentum returns often exhibit little sensitivity. Value returns are typically lower in times of poor funding liquidity, whereas, with notable exceptions, momentum returns are typically unaffected. Lastly, for almost all countries, value returns are high in poor stock market liquidity conditions.

Keywords: Developed international equity markets; Value effect; Momentum effect; Macroeconomic risk; Liquidity risk (search for similar items in EconPapers)
JEL-codes: G14 G15 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:44:y:2014:i:c:p:179-209

DOI: 10.1016/j.jimonfin.2013.12.005

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