Title: | Comovement |
Authors: | Barberis, Nicholas Shleifer, Andrei Wurgler, Jeffrey |
Issue Date: | Oct-2003 |
Series/Report no.: | S-DRP-03-18 |
Abstract: | We consider two broad views of return comovement: the traditional view, derived from frictionless economies with rational investors, which attributes it to comovement in news about fundamental value, and an alternative view, in which market frictions or noise-trader sentiment delink it from comovement in fundamentals. Building on Vijh (1994), we use data on inclusions into the S&P 500 to distinguish these views. After inclusion, a stock's beta with the S&P goes up. In bivariate regressions which control for the return of non-S&P stocks, the increase in S&P beta is even larger. These results are generally stronger in more recent data. Our findings cannot easily be explained by the fundamentals-based view and provide new evidence in support of the alternative friction- or sentiment-based view. |
URI: | http://hdl.handle.net/2451/26808 |
Appears in Collections: | Derivatives Research |
Files in This Item:
File | Description | Size | Format | |
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S-DRP-03-18.pdf | 1.12 MB | Adobe PDF | View/Open |
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