Return range and the cross-section of expected index returns in international stock markets

Umutlu, Mehmet; Bengitöz, Pelin

Abstract

This study examines the cross-sectional relation between return range and future returns for the first time in literature. We show that the return range can serve as a very practical measure of total volatility instead of standard deviation due to the range's high correlation with standard deviation and strong predictive ability. Range, standard deviation, and idiosyncratic volatility are cross-sectionally linked to future returns on indexes of small size, while earnings-to-price ratio and net share issuance predict returns of mid-cap and large-cap indexes, respectively. Maximum and minimum return effects along with the momentum effect are prevalent in returns of indexes of any size but stronger for small-cap indexes.

Citation

Umutlu, M., & Bengitöz, P. (2021). Return range and the cross-section of expected index returns in international stock markets. Quantitative Finance and Economics, 5(3), 421-451. https://doi.org/10.3934/qfe.2021019

• Journal Article Type: Article
• Acceptance Date: May 25, 2021
• Online Publication Date: May 31, 2021
• Publication Date: 2021
• Deposit Date: Jan 29, 2023
• Journal: Quantitative Finance and Economics
• Print ISSN: 2573-0134
• Publisher: AIMS Press
• Peer Reviewed: Peer Reviewed
• Volume: 5
• Issue: 3
• Pages: 421-451
• DOI: https://doi.org/10.3934/qfe.2021019
• Keywords: portfolio management, international equity investment, asset pricing