TY - JOUR
T1 - Value and Momentum from Investors' Perspective: Evidence from Professionals' Risk-Ratings
AU - Merkle, Christoph
AU - Sextroh, Christoph J.
PY - 2021
Y1 - 2021
N2 - We conduct a controlled experiment with financial professionals to examine more directly whether value and momentum reflect risk factors or mispricing. By eliciting their risk perceptions and return expectations for company stocks, we identify what constitutes a risky investment from the point of investors. Contrary to the risk factor hypothesis, value and momentum stocks are regarded as less risky. However, other factors, such as size and beta, fall in line with their traditional interpretation as risk factors. Consistent with empirical findings, we observe higher return expectations for momentum stocks, raising questions on analysts believing in a risk-return trade-off.
AB - We conduct a controlled experiment with financial professionals to examine more directly whether value and momentum reflect risk factors or mispricing. By eliciting their risk perceptions and return expectations for company stocks, we identify what constitutes a risky investment from the point of investors. Contrary to the risk factor hypothesis, value and momentum stocks are regarded as less risky. However, other factors, such as size and beta, fall in line with their traditional interpretation as risk factors. Consistent with empirical findings, we observe higher return expectations for momentum stocks, raising questions on analysts believing in a risk-return trade-off.
UR - https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3590160
M3 - Article
VL - 62
SP - 159
EP - 178
JO - Journal of Empirical Finance
JF - Journal of Empirical Finance
SN - 0927-5398
ER -