Determinants of Stock Returns: Factors or Systematic Co-Moments? Crisis versus Non-Crisis Periods
33 Pages Posted: 18 Jan 2014 Last revised: 14 Mar 2014
Date Written: March 11, 2014
In this paper we evaluate the intertemporal pricing performance of stock return determinants over the periods surrounding, and outside of, financial crises. The analysis focuses on the variables of size, book-to-market ratio, momentum, liquidity, and higher-order systematic co-moments. The evidence reveals that over non-crisis periods the market beta plays an important role in determining the cross-section of stock returns. Size, value, momentum, and liquidity also exhibit associations with the cross-section of stock returns. However, over crisis periods most of the variables we examined lose their explanatory power, suggesting that their usefulness is limited for investment purposes when financial markets experience crises. There is some evidence of coskewness pricing surrounding market crashes. Practitioners may consider coskewness over crisis periods.
Keywords: Asset Pricing; Systematic Co-Moment; Size; Value; Momentum; Liquidity
JEL Classification: G11; G12
Suggested Citation: Suggested Citation