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Price range and the cross-section of expected country and industry returns

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  • Zaremba, Adam

Abstract

We are the first to employ the price range (the difference between previous maximum and minimum prices) as a measure of country and industry risk. Having examined 51 country and 887 industry indices for the years 1974–2018, we demonstrate a strong positive relationship between price range and future returns. This effect is not explained by well-established return predictors that include value, size, momentum, reversal, skewness, and seasonality, and this effect visibly subsumes the traditional measures of volatility. The equal-weighted quartile of the countries (industries) with the highest price range outperform those with the lowest price range by 0.85% (1.07%) per month. The results are robust to different estimation methods, holding periods, the influence of trading costs, and subsample and subperiod analysis.

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  • Zaremba, Adam, 2019. "Price range and the cross-section of expected country and industry returns," International Review of Financial Analysis, Elsevier, vol. 64(C), pages 174-189.
    • Handle: RePEc:eee:finana:v:64:y:2019:i:c:p:174-189
    DOI: 10.1016/j.irfa.2019.05.012
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    More about this item

    Keywords

    Price range; Asset pricing; Return predictability; International investments; The cross-section of returns;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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