Work

Asymmetries in Stock Returns: Statistical Tests and Economic Evaluation

Year: 2006

Type: article

Abstract: We provide a model-free test for asymmetric correlations in which stocks move more often with the market when the market goes down than when it goes up, and also provide such tests for asymmetric betas and covariances. When stocks are sorted by size, book-to-market, and momentum, we find strong evidence of asymmetries for both size and momentum portfolios, but no evidence for book-to-market portfolios. Moreover, we evaluate the economic significance of incorporating asymmetries into investment decisions, and find that they can be of substantial economic importance for an investor with a disappointment aversion (DA) preference as described by Ang, Bekaert, and Liu (2005).

Source: Review of Financial Studies

DOI: 10.1093/rfs/hhl037

Authors: Yongmiao Hong, Jun Tu, Guofu Zhou

Institutions: Xiamen University, Cornell University, Singapore Management University, Washington University in St. Louis

Language: English

Topic: Financial Markets and Investment Strategies

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W2033298685

FWCI: 14.92

Cites: 66

Cited by: 383

Related to: 10