Verousis, Thanos and Voukelatos, Nikolaos (2018) Cross-sectional dispersion and expected returns. Quantitative Finance, 18 (5). pp. 813-826. DOI https://doi.org/10.1080/14697688.2017.1414515
Verousis, Thanos and Voukelatos, Nikolaos (2018) Cross-sectional dispersion and expected returns. Quantitative Finance, 18 (5). pp. 813-826. DOI https://doi.org/10.1080/14697688.2017.1414515
Verousis, Thanos and Voukelatos, Nikolaos (2018) Cross-sectional dispersion and expected returns. Quantitative Finance, 18 (5). pp. 813-826. DOI https://doi.org/10.1080/14697688.2017.1414515
Abstract
This study investigates whether the cross-sectional dispersion of stock returns, which reflects the aggregate level of idiosyncratic risk in the market, represents a priced state variable. We find that stocks with high sensitivities to dispersion offer low expected returns. Furthermore, a zero-cost spread portfolio that is long (short) in stocks with low (high) dispersion betas produces a statistically and economically significant return. Dispersion is associated with a significantly negative risk premium in the cross section (–1.32% per annum) which is distinct from premia commanded by alternative systematic factors. These results are robust to stock characteristics and market conditions.
Item Type: | Article |
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Uncontrolled Keywords: | Cross-sectional dispersion, Cross section of stock returns, Pricing factor |
Subjects: | H Social Sciences > HG Finance |
Divisions: | Faculty of Social Sciences Faculty of Social Sciences > Essex Business School |
SWORD Depositor: | Unnamed user with email elements@essex.ac.uk |
Depositing User: | Unnamed user with email elements@essex.ac.uk |
Date Deposited: | 15 Mar 2019 10:38 |
Last Modified: | 16 May 2024 19:33 |
URI: | http://repository.essex.ac.uk/id/eprint/24170 |
Available files
Filename: CSD_wp_4.pdf