Conditioning Variables and the Cross-section of Stock Returns
Author | : Wayne E. Ferson |
Publisher | : |
Total Pages | : 45 |
Release | : 1999 |
ISBN-10 | : OCLC:246000011 |
ISBN-13 | : |
Rating | : 4/5 ( Downloads) |
Download or read book Conditioning Variables and the Cross-section of Stock Returns written by Wayne E. Ferson and published by . This book was released on 1999 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: Previous studies have identified predetermined variables that have some power to explain the time series of stock and bond returns. This paper shows that loadings on the same variables also provide significant cross-sectional explanatory power for stock portfolio returns. These loadings are important, over and the above the variables advocated by Fama and French (1993) in their three factor model, ' and also the four factors of Elton, Gruber and Blake (1995). The explanatory power of the loadings on lagged variables is robust to various portfolio grouping procedures and other considerations. The lagged variables reveal information about the cross-section of expected returns that is not captured by popular asset pricing factors. These results carry implications for risk analysis, performance measurement, cost-of-capital calculations and other applications