Abstract
We first provide a cleaner and comprehensive out-of-sample test of three competing asset-pricing models. Our results suggest that the value and momentum factors have pervasive pricing power. Motivated by Garlappi and Yan (2011), we then examine if there is a unifying risk-based explanation for the value and momentum effects. Different from previous studies, we utilize two aggregate indexes from the Federal Reserve Bank Chicago, which not only cover much broader sets of macroeconomic and financial variables but also capture their common movements. Empirically, we find stronger evidence that both value and momentum effects are in part explained by innovations in future macroeconomic conditions.
Original language | English (US) |
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Pages (from-to) | 130-146 |
Number of pages | 17 |
Journal | Journal of Empirical Finance |
Volume | 20 |
Issue number | 1 |
DOIs | |
State | Published - Jan 2013 |
Keywords
- Empirical asset pricing
- Momentum
- Stock returns
- Value-growth effect
ASJC Scopus subject areas
- Finance
- Economics and Econometrics