Final published version
Research output: Contribution to Journal/Magazine › Journal article › peer-review
Research output: Contribution to Journal/Magazine › Journal article › peer-review
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TY - JOUR
T1 - The dispersion effect in international stock returns
AU - Leippold, Markus
AU - Lohre, Harald
PY - 2014/12/31
Y1 - 2014/12/31
N2 - We find that stocks exhibiting high dispersion in analysts' earnings forecasts not only underperform in the U.S. but also in some European countries. Investigating the abnormal returns generated by the dispersion strategy around the world for the 1990-2008 sample period, we observe that the returns of the strategy are uneven, with large abnormal returns realized during the mid-to-late 1990s and the 2000-2003 period. In particular, we document that the dispersion effect is most profitable in a very narrow time frame around the burst of the technology bubble. As a consequence, the dispersion hedge strategy would have been rather difficult to implement, especially given that the highest mispricing obtains for stocks characterized by high arbitrage costs.
AB - We find that stocks exhibiting high dispersion in analysts' earnings forecasts not only underperform in the U.S. but also in some European countries. Investigating the abnormal returns generated by the dispersion strategy around the world for the 1990-2008 sample period, we observe that the returns of the strategy are uneven, with large abnormal returns realized during the mid-to-late 1990s and the 2000-2003 period. In particular, we document that the dispersion effect is most profitable in a very narrow time frame around the burst of the technology bubble. As a consequence, the dispersion hedge strategy would have been rather difficult to implement, especially given that the highest mispricing obtains for stocks characterized by high arbitrage costs.
KW - G12
KW - G14
KW - G15
KW - Information uncertainty
KW - International dispersion effect
KW - Liquidity
U2 - 10.1016/j.jempfin.2014.09.001
DO - 10.1016/j.jempfin.2014.09.001
M3 - Journal article
AN - SCOPUS:85028143633
VL - 29
SP - 331
EP - 342
JO - Journal of Empirical Finance
JF - Journal of Empirical Finance
SN - 0927-5398
ER -