The Seasonal Stability of the Factor Structure of Stock Returns
AbstractThis paper investigates the month-by-month stability of (1) daily returns and correlation coe fficients of stock returns; (2) correlation and covariance matrices; (3) the number of return-generating factors; and (4) the APT pricing relationships. The results show that there is a January effect and a small-firm effect in stock returns. Correlation and covariance matric es are not stable across months and across the sample groups. The num ber of return-generating factors is rather stable with occasional ins tabilities that are related to the average correlation coefficients a mong stocks. The APT pricing relationship does not seem to be support ed by the two-stage process using the maximum likelihood factor analy sis. Copyright 1987 by American Finance Association.
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Bibliographic InfoArticle provided by American Finance Association in its journal Journal of Finance.
Volume (Year): 42 (1987)
Issue (Month): 5 (December)
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- Nicolau, Juan L., 2005. "Valuing the business environment on a daily basis," European Journal of Operational Research, Elsevier, vol. 164(1), pages 217-224, July.
- Huang, Roger D. & Jo, Hoje, 1995. "Data frequency and the number of factors in stock returns," Journal of Banking & Finance, Elsevier, vol. 19(6), pages 987-1003, September.
- Meric, Gulser & Leal, Ricardo P. C. & Ratner, Mitchell & Meric, Ilhan, 2001. "Co-movements of U.S. and Latin American equity markets before and after the 1987 crash," International Review of Financial Analysis, Elsevier, vol. 10(3), pages 219-235.
- Saban Celik, 2012. "Theoretical and Empirical Review of Asset Pricing Models:A Structural Synthesis," International Journal of Economics and Financial Issues, Econjournals, vol. 2(2), pages 141-178.
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