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Cross-sectional Return Dispersion and Time-Variation in Value and Momentum Premia
Christopher T. Stivers University of Georgia - Department of Banking and Finance Licheng Sun Old Dominion University January 29, 2009 Journal of Financial and Quantitative Analysis (JFQA), Forthcoming Abstract: We find that the market's recent cross-sectional dispersion in stock returns is positively related to the subsequent value book-to-market premium and negatively related to the subsequent momentum premium. The partial relation between return dispersion and the subsequent value and momentum premia remains strong when controlling for macroeconomic state variables suggested by the literature. Our findings are consistent with recent theoretical insights and empirical evidence which suggest that the market's return dispersion may serve as a leading countercyclical state variable, the value premium is countercyclical, and the momentum premium is procyclical.
Keywords: Value Premium, Book-to-Market Equity Ratio, Momentum, Return Dispersion JEL Classifications: G12, G14 Working Paper SeriesDate posted: March 20, 2008 ; Last revised: February 08, 2009Suggested CitationContact Information
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