Price, Cultural Dimensions, and the Cross-Section of Expected Stock Returns

70 Pages Posted: 16 Oct 2019

See all articles by Ulrich Hammerich

Ulrich Hammerich

University of Bremen - Department of Finance

Date Written: October 7, 2019

Abstract

We document a nominal stock price effect that is (like momentum) associated with (national) culture. Using the full spectrum of cultural dimensions proposed by Hofstede et al. and the cross-section of stock returns of 41 countries, we not only show a robust predictive and explanatory power of price in conjunction with several cultural dimensions, but of cultural differences in general. Although momentum and price are related investment strategies, we find a broad (escalating) European high-price effect, but a material low-price effect in Asia as well as the most significant and robust low-price effect for the US. Most consistent around the world, high-priced stocks show lower return volatility and market betas than low-priced stocks and lower values for skewness of returns.

Keywords: nominal price effect, cultural finance, behavioral finance, asset pricing, market anomalies

JEL Classification: G11, G12, G14, G15, G41

Suggested Citation

Hammerich, Ulrich, Price, Cultural Dimensions, and the Cross-Section of Expected Stock Returns (October 7, 2019). Available at SSRN: https://ssrn.com/abstract=3464917 or http://dx.doi.org/10.2139/ssrn.3464917

Ulrich Hammerich (Contact Author)

University of Bremen - Department of Finance ( email )

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

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