Style investing, comovement and return predictability

Sunil Wahal, M. Deniz Yavuz

Research output: Contribution to journalArticle

36 Scopus citations

Abstract

Barberis and Shleifer (2003) argue that style investing generates momentum and reversals in style and individual asset returns, as well as comovement between individual assets and their styles. Consistent with these predictions, in some specifications, past style returns help explain future stock returns after controlling for size, book-to-market and past stock returns. We also use comovement to identify style investing and assess its impact on momentum. High comovement momentum portfolios have significantly higher future returns than low comovement momentum portfolios. Overall, our results suggest that style investing plays a role in the predictability of asset returns.

Original languageEnglish (US)
Pages (from-to)136-154
Number of pages19
JournalJournal of Financial Economics
Volume107
Issue number1
DOIs
StatePublished - Jan 1 2013

Keywords

  • Behavioral finance
  • Comovement
  • Momentum
  • Return predictability
  • Style investing

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics
  • Strategy and Management

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