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Determinants of stock returns: Factors or systematic co-moments? Crisis versus non-crisis periods

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  • Hung, Chi-Hsiou D.
  • Azad, A.S.M. Sohel
  • Fang, Victor

Abstract

In this paper we evaluate the intertemporal pricing performance of stock return determinants over the periods surrounding, and outside of, financial crises. The analysis focuses on the variables of size, book-to-market ratio, momentum, liquidity, and higher-order systematic co-moments. The evidence reveals that over non-crisis periods the market beta plays an important role in determining the cross-section of stock returns. Size, value, momentum, and liquidity also exhibit associations with the cross-section of stock returns. However, over crisis periods most of the variables we examined lose their explanatory power, suggesting that their usefulness is limited for investment purposes when financial markets experience crises. There is some evidence of coskewness pricing surrounding market crashes. Practitioners may consider coskewness over crisis periods.

Suggested Citation

  • Hung, Chi-Hsiou D. & Azad, A.S.M. Sohel & Fang, Victor, 2014. "Determinants of stock returns: Factors or systematic co-moments? Crisis versus non-crisis periods," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 31(C), pages 14-29.
    • Handle: RePEc:eee:intfin:v:31:y:2014:i:c:p:14-29
    DOI: 10.1016/j.intfin.2014.03.005
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    More about this item

    Keywords

    Systematic co-moment; Size; Value; Momentum; Liquidity;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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