Predicting extreme performers in European equities

Ying L. Becker () and Richard J. Ochman
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Ying L. Becker: State Street Global Advisors, State Street Financial Center
Richard J. Ochman: principal of SSgA's Advanced Research Center

Journal of Asset Management, 2004, vol. 4, issue 6, No 2, 367-391

Abstract: Abstract Based on SSgA's previous research on predicting extreme stock performers in the US equity market, this paper extends the study to European equity markets. It investigates important characteristics of stocks in the MSCI Europe index predicted to experience extreme returns over the next three months. With a two-stage multivariate logistic model, these extreme performers are separated into winners and losers. For the entire test period, over 17 per cent of 60 predicted extreme performers experience extreme price movements in the subsequent three-month period. An average total three-month return of 4.5 per cent is obtained by going long (short) predicted extreme winners (losers) over the period September 1994–June 2001.

Keywords: volatility; momentum; sentiment; market efficiency; behavioural finance; extreme performer; fundamental analysis (search for similar items in EconPapers)
Date: 2004
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DOI: 10.1057/palgrave.jam.2240117

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