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

• Main Authors: Mehmet Umutlu, Pelin Bengitöz
• Format: Article
• Language: English
• Published: AIMS Press 2021-05-01
• Series: Quantitative Finance and Economics
• Subjects: portfolio management; international equity investment; asset pricing
• Online Access: https://www.aimspress.com/article/doi/10.3934/QFE.2021019?viewType=HTML

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.