Practical Applications of Stock Characteristics and Stock Returns: A Skeptic’s Look at the Cross Section of Expected Returns

2020 ◽  
Vol 8 (2) ◽  
pp. 1.26-7
Author(s):  
Bradford Cornell
Keyword(s):  
Stock Returns ◽  
Cross Section ◽  
Expected Returns ◽  
Practical Applications ◽  
The Cross

Idiosyncratic Volatility and the Cross Section of Expected Returns

2008 ◽  
Vol 43 (1) ◽  
pp. 29-58 ◽  
Author(s):  
Turan G. Bali ◽  
Nusret Cakici
Keyword(s):  
Stock Returns ◽  
Cross Section ◽  
Idiosyncratic Volatility ◽  
Expected Returns ◽  
Cross Sectional ◽  
Monthly Data ◽  
Portfolio Returns ◽  
Expected Stock Returns ◽  
The Cross ◽  
Data Frequency

AbstractThis paper examines the cross-sectional relation between idiosyncratic volatility and expected stock returns. The results indicate that i) the data frequency used to estimate idiosyncratic volatility, ii) the weighting scheme used to compute average portfolio returns, iii) the breakpoints utilized to sort stocks into quintile portfolios, and iv) using a screen for size, price, and liquidity play critical roles in determining the existence and significance of a relation between idiosyncratic risk and the cross section of expected returns. Portfoliolevel analyses based on two different measures of idiosyncratic volatility (estimated using daily and monthly data), three weighting schemes (value-weighted, equal-weighted, inverse volatility-weighted), three breakpoints (CRSP, NYSE, equal market share), and two different samples (NYSE/AMEX/NASDAQ and NYSE) indicate that no robustly significant relation exists between idiosyncratic volatility and expected returns.

Cross section of stock returns on Shari’ah-compliant stocks: evidence from Pakistan

2019 ◽  
Vol 12 (2) ◽  
pp. 282-302 ◽  
Author(s):  
Salman Ahmed Shaikh ◽  
Mohd Adib Ismail ◽  
Abdul Ghafar Ismail ◽  
Shahida Shahimi ◽  
Muhammad Hakimi Mohd. Shafiai
Keyword(s):  
Asset Pricing ◽  
Stock Returns ◽  
Cross Section ◽  
Factor Model ◽  
Five Factor Model ◽  
Value Premium ◽  
Expected Returns ◽  
Content Type ◽  
The Cross ◽  
Three Factor

Purpose This paper aims to study the cross section of expected returns on Shari’ah-compliant stocks in Pakistan by using single- and multi-factor asset pricing models. Design/methodology/approach To estimate cross section of expected returns of Shari’ah-compliant stocks, the study uses capital asset pricing model (CAPM), Fama-French three-factor model and Fama-French five-factor model. Data for the period 2001-2015 on 217 companies are used. For the market portfolio, PSX-100 and Dow Jones Islamic Index for Pakistan are used. Findings The study could not find empirical support for CAPM using Lintner (1965), Black et al. (1972) and Fama and Macbeth (1973) approach. Nonetheless, the relation between beta and returns is positive in up-market and negative in down-market. The results of Fama-French three-factor and five-factor models suggest that size premium is positive and significant for explaining the cross section of stock returns of small size stocks, whereas value premium is positive and significant for explaining the cross section of returns of high value stocks. Practical implications The results suggest that fund managers can use Shari’ah-compliant stocks for portfolio diversification and for offering specialized investments given the positive market excess returns and the existence of size and value premium on Shari’ah-compliant stocks. Originality/value This is the first study on Fama-French (2015) five-factor model for Islamic capital markets in Pakistan.

scholarly journals Idiosyncratic Volatility and Cross-section of Stock Returns: Evidences from India

2016 ◽  
Vol 8 (1) ◽  
pp. 1
Author(s):  
Prashant Sharma ◽  
Brajesh Kumar
Keyword(s):  
Stock Returns ◽  
Cross Section ◽  
Empirical Relationship ◽  
Idiosyncratic Volatility ◽  
Expected Returns ◽  
Cross Sectional ◽  
The Cross ◽  
Highly Correlated ◽  
Indian Stock Market ◽  
The Relationship

<p>The present study examines the cross-sectional pricing ability of idiosyncratic volatility (IV) in Indian stock market and investigates the relationship amongst expected idiosyncratic volatility (EI), unexpected idiosyncratic volatility (UI), and cross-section of stocks returns. The study uses ARIMA (2, 0, 1) model to IV into EI and UI. The stocks returns are regressed on IV, EI and UI using Newey-West (1987) corrections, in order to investigate their empirical relationship.  The study finds that IV is positively related with stock returns. Further the IV significantly explains the cross-section of stock returns in Indian context. After imposing control over UI, as it is highly correlated with unexpected returns, the inter-temporal relationship between EI and expected returns turns out to be positive.</p>

Asymmetry in Stock Comovements: An Entropy Approach

2018 ◽  
Vol 53 (4) ◽  
pp. 1479-1507 ◽  
Author(s):  
Lei Jiang ◽  
Ke Wu ◽  
Guofu Zhou
Keyword(s):  
Stock Returns ◽  
Cross Section ◽  
Stock Return ◽  
Expected Returns ◽  
Market Return ◽  
Model Free ◽  
The Cross

We provide an entropy approach for measuring the asymmetric comovement between the return on a single asset and the market return. This approach yields a model-free test for stock return asymmetry, generalizing the correlation-based test proposed by Hong, Tu, and Zhou (2007). Based on this test, we find that asymmetry is much more pervasive than previously thought. Moreover, our approach also provides an entropy-based measure of downside asymmetric comovement. In the cross section of stock returns, we find an asymmetry premium: Higher downside asymmetric comovement with the market indicates higher expected returns.

Seasonality in the Cross-Section of Stock Returns

CFA Digest ◽  
2008 ◽  
Vol 38 (3) ◽  
pp. 55-56
Author(s):  
Kathryn Dixon Jost
Keyword(s):  
Stock Returns ◽  
Cross Section ◽  
The Cross
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