Value, size, sector, and momentum stocks

2021 ◽  
pp. 187-198
Author(s):  
Jesper Rangvid
Keyword(s):  
Stock Market ◽  
Business Cycle ◽  
Stock Returns ◽  
The Business Cycle ◽  
Better Than ◽  
Do So

This chapter studies the characteristics of the most important and well-known factors. Factor portfolios are portfolios of stocks based on certain characteristics, such as the size of the company, the price of the stock in relation to, e.g., the earnings of the company, the sector within which the firm operates, etc.Factors that perform better than the overall stock market tend to suffer more during recessions. To compensate investors for their underperformance during recessions, returns on these factors during expansions are so high that average stock returns over the full business cycle end out being high. Conversely, those factors that provide lower average returns than the overall stock market do so because they perform relatively better during recessions. The business cycle again plays an important role for understanding stock-market patterns.

Risk-Return Tradeoff in U.S. Stock Returns over the Business Cycle

2011 ◽  
Vol 47 (1) ◽  
pp. 137-158 ◽  
Author(s):  
Henri Nyberg
Keyword(s):  
Stock Market ◽  
Business Cycle ◽  
Stock Returns ◽  
Regime Switching ◽  
Probit Model ◽  
Expected Return ◽  
Stock Market Returns ◽  
Risk Return ◽  
The Business Cycle ◽  
Cycle Indicator

AbstractIn the empirical finance literature, findings on the risk-return tradeoff in excess stock market returns are ambiguous. In this study, I develop a new qualitative response (QR)-generalized autoregressive conditional heteroskedasticity-in-mean (GARCH-M) model combining a probit model for a binary business cycle indicator and a regime-switching GARCH-M model for excess stock market return with the business cycle indicator defining the regime. Estimation results show that there is statistically significant variation in the U.S. excess stock returns over the business cycle. However, consistent with the conditional intertemporal capital asset pricing model (ICAPM), there is a positive risk-return relationship between volatility and expected return independent of the state of the economy.

Stock Returns and the Business Cycle

CFA Digest ◽  
2005 ◽  
Vol 35 (2) ◽  
pp. 42-43
Author(s):  
Daniel B. Cashion
Keyword(s):  
Business Cycle ◽  
Stock Returns ◽  
The Business Cycle

From Main Street to Wall Street

2021 ◽  
Author(s):  
Jesper Rangvid
Keyword(s):  
Economic Growth ◽  
Stock Market ◽  
Business Cycle ◽  
Financial Markets ◽  
Stock Returns ◽  
Economic Activity ◽  
Wall Street ◽  
Business Cycle Fluctuations ◽  
Main Street ◽  
Long Run

From Main Street to Wall Street examines the relation between the economy and the stock market. It discusses the academic theories and empirical facts, and guides readers through the fascinating interaction between economic activity and financial markets. Itexamines what causes long-run economic growth and shorter-term business-cycle fluctuations and analyses their impact on stock markets. From Main Street to Wall Street also discusses how investors can use knowledge of economic activity and financial markets to formulate expectations to future stock returns. The book relies on data, and figures and tables illustrate arguments and theories in intuitive ways.In the end, From Main Street to Wall Street helps academic scholars and practitioners navigate financial markets by understanding the economy.

Introduction

2021 ◽  
pp. 1-6
Author(s):  
Jesper Rangvid
Keyword(s):  
Economic Growth ◽  
Business Cycle ◽  
Stock Returns ◽  
Economic Activity ◽  
Final Part ◽  
Stylized Facts ◽  
Long Run ◽  
Key Concepts ◽  
The Business Cycle

Chapter 1 contains an overview of the book. Part I introduces key concepts, definitions, and stylized facts regarding long–run economic growth and stock returns.Part II analyses the relation between economic growth and stock returns in the long run. Part III examines the shorter-horizon relation between economic growth and stock returns: the relation over the business cycle. Part IV explains how to make reasonable projections for economic activity, both for the short and the long run. Part V deals with expected future stock returns. The final part, a short one including one chapter only, explains how one can use the insights from the book when making investments.

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