Style Investing and Return Predictability

Subject Areas : Journal of Investment Knowledge

Maryam Davallou ¹ , Hamidreza Fartokzadeh ²

1 - Assistant Prof. of Shahid Beheshti University
2 - Associate Prof. of Malek Ashtar Universiyy

Received: 2013-05-10 Accepted : 2013-09-11 Published : 2013-09-11

Keywords: Return Predictability, Style Investing, Style Beta,

Abstract :

This research investigates cross section individual stock return predictability by style return in Tehran Stock Exchange. Test of stock return predictability is performed based on Fama and Mac-Beth regression model using data from 1380 to 1389. Also for profound analysis, the relation between co-movement of stock return with its style return and momentum is examined. So, Portfolio analysis approach based on dual sorting is used for the latter test. The outcomes of this research confirm future cross-section stock return predictability by style-based return over twelve month formation period. The results indicate that co-movement of stock return with its style return generates variation in momentum profit. This finding is restricted to twelve month formation period and one month future return horizon and is not observed over longer horizon future return.