Parallels between the Cross-Sectional Predictability of Stock and Country Returns

Posted: 26 Jun 1998

See all articles by Clifford S. Asness

Clifford S. Asness

AQR Capital Management, LLC

John M. Liew

AQR Capital Management, LLC

Ross L. Stevens

Stone Ridge; New York Digital Investment Group

Date Written: March 1996

Abstract

Book-to-market ratio (BE/ME), market equity (ME), and one- year past return (momentum) (MOM) help explain the cross- section of expected individual stock returns within the U.S. and within other countries. Examining equity markets as a whole, in contrast to individual stocks, we uncover strong parallels between the explanatory power of these variables for individual stocks and for countries. First, country versions of BE/ME, ME, and MOM help explain the cross-section of expected country returns. Second, the January seasonal in ME's explanatory power for stocks also appears for countries. Third, portfolios formed by sorting stocks and countries on these variables produce similar patterns in profitability before and after the portfolio formation date.

JEL Classification: G14

Suggested Citation

Asness, Cliff S. and Liew, John M. and Stevens, Ross L., Parallels between the Cross-Sectional Predictability of Stock and Country Returns (March 1996). Available at SSRN: https://ssrn.com/abstract=7482

Cliff S. Asness

AQR Capital Management, LLC ( email )

Two Greenwich Plaza, 3rd Floor
Greenwich, CT 06830
United States
203-742-3601 (Phone)
203-742-3101 (Fax)

HOME PAGE: http://www.aqrcapital.com

John M. Liew (Contact Author)

AQR Capital Management, LLC ( email )

2 Greenwich Plaza
3rd floor
Greenwich, CT 06830
United States
(203) 742-3604 (Phone)
(203) 742-3104 (Fax)

HOME PAGE: http://www.aqr.com

Ross L. Stevens

Stone Ridge ( email )

New York, NY
United States

New York Digital Investment Group ( email )

New York, NY
United States

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