Work

The Characteristics that Provide Independent Information about Average U.S. Monthly Stock Returns

Year: 2017

Type: article

Abstract: We take up Cochrane’s (2011) challenge to identify the firm characteristics that provide independent information about average U.S. monthly stock returns by simultaneously including 94 characteristics in Fama-MacBeth regressions that avoid overweighting microcaps and adjust for data snooping bias. We find that while 12 characteristics are reliably independent determinants in non-microcap stocks during 1980-2014 as a whole, return predictability fell sharply in 2003 such that just two characteristics have been independent determinants since then. Outside of microcaps, the hedge returns to exploiting characteristics-based predictability have also been insignificantly different from zero since 2003.

Source: Review of Financial Studies

DOI: 10.1093/rfs/hhx019

Authors: Jeremiah Green, John R. M. Hand, X. Frank Zhang

Institutions: Pennsylvania State University, University of North Carolina at Chapel Hill, Yale University

Language: English

Topic: Financial Markets and Investment Strategies

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W3121274430

FWCI: 65.55

Cites: 147

Cited by: 686

Related to: 10