Exploiting stochastic dominance to generate abnormal stock returns

Clark, Ephraim A. and Kassimatis, Konstantinos (2014) Exploiting stochastic dominance to generate abnormal stock returns. Journal of Financial Markets, 20 . pp. 20-38. ISSN 1386-4181

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Abstract

We construct zero cost portfolios based on second and third degree stochastic dominance and show that they produce systematic, statistically significant, abnormal returns. These returns are robust with respect to the single index CAPM, the Fama-French 3-factor model, the Carhart 4-factor model and the liquidity 5-factor model. They are also robust with respect to momentum portfolios, transactions costs, varying time periods and when broken down by a range of risk factors, such as firm size, leverage, age, return volatility, cash flow volatility and trading volume.

Item Type: Article
Research Areas: A. > Business School > Accounting and Finance
Item ID: 17102
Notes on copyright: This is a RoMEO green journal - author can archive post-print (ie final draft post-refereeing) - Author's post-print on open access repository after an embargo period of between 18 months - Author's post-print must be released with a Creative Commons Attribution Non-Commercial No Derivatives License
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Depositing User: Sasha Antoni
Date Deposited: 29 Jun 2015 08:55
Last Modified: 07 Sep 2018 12:56
URI: http://eprints.mdx.ac.uk/id/eprint/17102

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