دانلود رایگان مقاله شناسایی اهمیت نسبی ویژگی های سهام

Abstract

There is no consensus in the literature as to which stock characteristic best explains returns. In this study, we employ a novel econometric approach better suited than the traditional characteristic sorting method to answer this question for the UK market. We evaluate the relative explanatory power of market, size, momentum, volatility, liquidity and bookto-market factors in a semiparametric characteristic-based factor model which does not require constructing characteristic portfolios. We find that momentum is the most important factor and liquidity is the least important based on their relative contribution to the fit of the model and the proportion of sample months for which factor returns are significant. Overall, this study provides strong evidence to support that the momentum characteristic can best explain stock returns in the UK market. The econometric approach employed in this study is a novel way to assess relevant investment risk in international financial markets outside U.S. Moreover, multinational institutions and investors can use this approach to identify regional factors in order to diversify their portfolios.

5. Conclusions

Stock returns are driven by firms’ own characteristics. We address an important empirical question as to which firm characteristic canbest explainstock returns inthe UKmarket. To answer thisquestion, we employ a semiparametric approach to estimate the characteristic-based factor model first introduced by CHL. While this study is the first out-of-sample analysis to apply the new method, we also augment the CHL model by including the liquidity characteristic (Liu, 2006) along with the market, size, book-to-market, volatility and momentum factors. Following the CHL methodology, we find that factor betas exhibit nonlinear relationships with stock characteristics consistent with Connor and Linton (2007) and CHL. The nonlinearity implies that the marginal return premium for each characteristic is not linearly proportional to the difference in return premia between firms with extreme characteristics. We also find that the liquidity-beta function is relatively flat compared to other characteristic-beta functions suggesting that stock returns are not as sensitive to the liquidity premium as to other characteristics’ premia.