View article

We present additional evidence on the risk and return of stocks in the United States and globally in the 1997-2009 period. We use a stock selection model incorporating fundamental data, momentum, and analysts’ expectations and create portfolios using fundamental and statistically-based risk models. We find additional evidence to support the use of multi-factor models for portfolio construction and risk control. We created portfolios for the January 1997 December 2009 period. We report three conclusions:(1) a stock selection model incorporating reported fundamental data, such as earnings, book value, cash flow, and sales, and analysts’ earnings forecasts and revisions and momentum can identify mispriced securities;(2) statistically-based risk models produce a more effective return-to-risk portfolio measures than fundamentally-based risk models; and (3) the global portfolio returns of the multi-factor risk …