Nominal Stock Price Investing

59 Pages Posted: 5 Oct 2016 Last revised: 20 Nov 2018

See all articles by Ulrich Hammerich

Ulrich Hammerich

University of Bremen - Department of Finance

Christian Fieberg

University of Bremen - Department of Business Administration

Thorsten Poddig

University of Bremen

Date Written: October 31, 2018

Abstract

We find that high-priced stocks show significantly higher Sharpe ratios than low-priced stocks. Also, price as an investment style is especially beneficial when applied in a multi-investment style setting, reducing portfolio volatility significantly while adding additional alpha. Implementing robustness tests and factor regressions, the price effect stays alive despite revealing tight connections to investment styles like momentum, low beta and size. Our framework offers yet ignored explanations why nominal prices are consequential for stock returns. We line our argumentation using an event-based, market-wide dramatic dispersion of stock prices in our sample, turning a strong low-price into a strong high-price effect.

Keywords: nominal price effect, behavioral finance, asset pricing, low beta, skewness of returns

JEL Classification: G02, G11, G12, G14, G15

Suggested Citation

Hammerich, Ulrich and Fieberg, Christian and Poddig, Thorsten, Nominal Stock Price Investing (October 31, 2018). Available at SSRN: https://ssrn.com/abstract=2845312 or http://dx.doi.org/10.2139/ssrn.2845312

Ulrich Hammerich (Contact Author)

University of Bremen - Department of Finance ( email )

Max-von-Laue-Str. 1
Bremen, D-28359
Germany

Christian Fieberg

University of Bremen - Department of Business Administration ( email )

Bremen, D-28359
Germany

HOME PAGE: http://www.fiwi.uni-bremen.de

Thorsten Poddig

University of Bremen ( email )

Universitaetsallee GW I
Bremen, D-28334
Germany

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