A Global Macroeconomic Risk Model for Value, Momentum, and Other Asset Classes
70 Pages Posted: 22 Apr 2016 Last revised: 5 May 2017
Date Written: May 2017
Value and momentum returns and combinations of them are explained by their loadings on global macroeconomic risk factors across both countries and asset classes. These loadings describe why value and momentum have positive return premia and why they are negatively correlated. The global macroeconomic risk factor model also performs well in summarizing the cross section of various additional asset classes. The findings identify the source of the common variation in expected returns across asset classes and countries suggesting that markets are integrated.
Keywords: Value, momentum, global macroeconomic risk, market integration
JEL Classification: G1, G11, G12
Suggested Citation: Suggested Citation