Return range and the cross-section of expected index returns in international stock markets

Quantitative Finance and Economics

38 Pages Posted: 4 Jun 2021

See all articles by Mehmet Umutlu

Mehmet Umutlu

Edinburgh Napier University, The Business School, Accounting and Finance Subject Group

Pelin Bengitoz

Yasar University - Deparment of International Trade and Finance

Date Written: September 1, 2020

Abstract

This study examines the cross-sectional relation between return range and future returns for the first time in literature. We show that the return range can serve as a very practical measure of total volatility instead of standard deviation due to the range’s high correlation with standard deviation and strong predictive ability. Range, standard deviation, and idiosyncratic volatility are cross-sectionally linked to future returns on indexes of small size, while earnings-to-price ratio and net share issuance predict returns of mid-cap and large-cap indexes, respectively. Maximum and minimum return effects along with the momentum effect are prevalent in returns of indexes of any size but stronger for small-cap indexes.

Keywords: portfolio management, international equity investment, asset pricing

JEL Classification: G11, G12, G17

Suggested Citation

Umutlu, Mehmet and Bengitoz, Pelin, Return range and the cross-section of expected index returns in international stock markets (September 1, 2020). Quantitative Finance and Economics, Available at SSRN: https://ssrn.com/abstract=3859175

Mehmet Umutlu

Edinburgh Napier University, The Business School, Accounting and Finance Subject Group ( email )

Craiglockhart Campus
Edinburgh, Scotland EH11 4BN
United Kingdom

Pelin Bengitoz (Contact Author)

Yasar University - Deparment of International Trade and Finance ( email )

Universite Street
Izmir
Turkey

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