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Style investing, comovement and return predictability

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  • Wahal, Sunil
  • Yavuz, M. Deniz
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    Abstract

    Barberis and Shleifer (2003) argue that style investing generates momentum and reversals in style and individual asset returns, as well as comovement between individual assets and their styles. Consistent with these predictions, in some specifications, past style returns help explain future stock returns after controlling for size, book-to-market and past stock returns. We also use comovement to identify style investing and assess its impact on momentum. High comovement momentum portfolios have significantly higher future returns than low comovement momentum portfolios. Overall, our results suggest that style investing plays a role in the predictability of asset returns.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0304405X12001596
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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Financial Economics.

    Volume (Year): 107 (2013)
    Issue (Month): 1 ()
    Pages: 136-154

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    Handle: RePEc:eee:jfinec:v:107:y:2013:i:1:p:136-154

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    Web page: http://www.elsevier.com/locate/inca/505576

    Related research

    Keywords: Style investing; Momentum; Return predictability; Comovement; Behavioral finance;

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    References

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