The Dispersion Effect in International Stock Returns
University of Zurich - Department of Banking and Finance; Swiss Finance Institute; University of Zurich - Faculty of Economics, Business Administration and Information Technology
Deka Investment GmbH
November 16, 2012
We find that stocks exhibiting high dispersion in analysts' earnings forecasts do not only underperform in the U.S. but also in some European countries. However, testing for the dispersion effect in many countries calls for adequate multiple testing controls. Under this paradigm it turns out that none of the naively derived dispersion effects proves to be a sustainable phenomenon. Rationalizing this finding, we document that the dispersion effect's abnormal returns amass in a very narrow time frame and mainly derive from a bet against the technology bubble that would have been rather difficult to implement.
Number of Pages in PDF File: 34
Keywords: International Dispersion Effect, Multiple Hypotheses Testing, Information Uncertainty, Liquidity
JEL Classification: G12, G14, G15working papers series
Date posted: June 1, 2008 ; Last revised: November 17, 2012
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