The characteristics that provide independent information about average u.s. monthly stock returns

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

Research output: Contribution to journalArticle

38 Scopus citations

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 from 1980 to 2014 as a whole, return predictability sharply fell in 2003 such that just two characteristics have been independent determinants since then. Outside of microcaps, the hedge returns to exploiting characteristics-based predictability also have been insignificantly different from zero since 2003. (JEL G12, G14)

Original languageEnglish (US)
Pages (from-to)4389-4436
Number of pages48
JournalReview of Financial Studies
Volume30
Issue number12
DOIs
StatePublished - Dec 1 2017

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics

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