Publication Type
Journal Article
Version
submittedVersion
Publication Date
9-2007
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).
Discipline
Finance and Financial Management | Portfolio and Security Analysis
Research Areas
Finance
Publication
Review of Financial Studies
Volume
20
Issue
5
First Page
1547
Last Page
1581
ISSN
0893-9454
Identifier
10.1093/rfs/hhl037
Publisher
Oxford University Press
Citation
HONG, Yongmiao; TU, Jun; and ZHOU, Guofu.
Asymmetries in stock returns: Statistical tests and economic evaluation. (2007). Review of Financial Studies. 20, (5), 1547-1581.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/4574
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1093/rfs/hhl037