Stock Market Dispersion, the Business Cycle and Expected Factor Returns

Timotheos Angelidis, Athanasios Sakkas, Nikolaos Tessaromatis: This study provides evidence using data from the G7 countries suggesting that return dispersion may serve as an economic state variable in that it reliably predicts time-variation in economic activity, market returns, the value and momentum premia and market volatility.

Author(s):

Timotheos Angelidis

Department of Economics,University of Peloponnese, Greece

Athanasios Sakkas

Department of Accounting and Finance,Athens University of Economics and Business, Greece

Nikolaos Tessaromatis

EDHEC Business School and EDHEC-Risk Institute, France

A relatively high return dispersion predicts a deterioration in business conditions, a higher value premium, a smaller momentum premium and lower market returns. The evidence is robust to alternative specifications of return dispersion and is not driven by US data. Return dispersion conveys incremental information relative to idiosyncratic risk.

Type: Working paper
Date: le 14/09/2015
Research Cluster : Finance

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