What matters in a characteristic?

• 成果类型: Article
• 署名作者: Langlois, Hugues
• 署名单位: Hautes Etudes Commerciales (HEC) Paris
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2023.04.010
• 发表日期: 2023
• 页码: 52-72
• 关键词: IPCA; Characteristics; country; industry; alpha; systematic risk

摘要

We investigate how different components in firm characteristics affect expected returns and comovements in international stock markets. We decompose characteristics into coun-try, industry, and country-and industry-adjusted (i.e., orthogonal) components. Then, we use these components to capture time-series and cross-sectional variations in stock-level alphas and factor exposures. Decomposing characteristics is crucial to explain jointly ex-pected returns and comovements: (i) adjusted (country) components are the most im-portant determinant of alphas (comovements), (ii) component-based models outperform benchmark models, and (iii) alphas are statistically significant. However, alphas have been trending down over time, and alpha-chasing strategies are not profitable once we account for estimation risk and trading costs.(c) 2023 Elsevier B.V. All rights reserved.