HEC Research Papers Series,
HEC Paris

Abstract: We investigate how different components in firm characteristics affect expected returns and comovements in international stock markets. We decompose characteristics into country, industry, and adjusted components. Then, we use these components to capture time-series and cross-sectional variations in stock-level alphas and factor exposures. Decomposing characteristics is crucial to explain jointly expected returns and comovements: (i) adjusted (country) components are the most important determinant of alphas (comovements), (ii) component-based models outperform benchmark models, and (iii) alphas are statistically significant. However, alphas have been trending down over time, and alpha-chasing strategies are not profitable once we account for estimation risk and trading costs.

Keywords: IPCA; characteristics; country; industry; alpha; systematic risk.

JEL-codes: G12; G15

62 pages, May 20, 2021

Full text files

papers.cfm?abstract_id=3848587 HTML file Full text

Download statistics

• HEC Paris
• Ordering Working Papers
• Home page for this series

Questions (including download problems) about the papers in this series should be directed to Antoine Haldemann ()
Report other problems with accessing this service to Sune Karlsson ().

RePEc:ebg:heccah:1439This page generated on 2024-09-13 22:19:53.