Size, Value, and Momentum in Developed Country Equity Returns: Macroeconomic and Liquidity Exposures

60 Pages Posted: 6 Dec 2013 Last revised: 7 Dec 2013

See all articles by Nusret Cakici

Nusret Cakici

Fordham University

Sinan Tan

Fordham University - Gabelli School of Business

Date Written: November 19, 2013

Abstract

The paper investigates value and momentum factors in 23 developed international stock markets. We find that typically value and momentum premia are smaller and more negatively correlated for large market capitalization stocks relative to small. Momentum factors are more highly correlated internationally relative to value. We provide international evidence on three sets of risk exposures of value and momentum returns: macroeconomic risk, funding liquidity risk, and stock market liquidity risk. We find that value returns are typically lower prior to a recession while momentum returns often exhibit little sensitivity. Value returns are typically lower in times of poor funding liquidity, whereas, with notable exceptions, momentum returns are typically unaffected. Lastly, for almost all countries, value returns are high in poor stock market liquidity conditions. The same result appears to be true for momentum in Asia Pacific, North America, and largely in Europe.

Keywords: developed international equity markets, value effect, momentum effect, macroeconomic risk, liquidity risk

JEL Classification: G14, G15

Suggested Citation

Cakici, Nusret and Tan, Sinan, Size, Value, and Momentum in Developed Country Equity Returns: Macroeconomic and Liquidity Exposures (November 19, 2013). Available at SSRN: https://ssrn.com/abstract=2362521 or http://dx.doi.org/10.2139/ssrn.2362521

Nusret Cakici (Contact Author)

Fordham University ( email )

Fordham University
Graduate School of Business
New York, NY 10023
United States
2126366776 (Phone)

Sinan Tan

Fordham University - Gabelli School of Business ( email )

113 West 60th Street
Bronx, NY 10458
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
488
rank
54,423
Abstract Views
1,561
PlumX Metrics