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

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

Research output: Contribution to journalArticle

17 Citations (Scopus)

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

Fingerprint

Stock returns
Hedge
Data snooping
Firm characteristics
Return predictability
Predictability

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics

Cite this

Green, Jeremiah Ross ; Hand, John R.M. ; Zhang, X. Frank. / The characteristics that provide independent information about average u.s. monthly stock returns. In: Review of Financial Studies. 2017 ; Vol. 30, No. 12. pp. 4389-4436.
@article{66c67df721b84ad598e94470e44340bb,
title = "The characteristics that provide independent information about average u.s. monthly stock returns",
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)",
author = "Green, {Jeremiah Ross} and Hand, {John R.M.} and Zhang, {X. Frank}",
year = "2017",
month = "12",
day = "1",
doi = "10.1093/rfs/hhx019",
language = "English (US)",
volume = "30",
pages = "4389--4436",
journal = "Review of Financial Studies",
issn = "0893-9454",
publisher = "Oxford University Press",
number = "12",

}

The characteristics that provide independent information about average u.s. monthly stock returns. / Green, Jeremiah Ross; Hand, John R.M.; Zhang, X. Frank.

In: Review of Financial Studies, Vol. 30, No. 12, 01.12.2017, p. 4389-4436.

Research output: Contribution to journalArticle

TY - JOUR

T1 - The characteristics that provide independent information about average u.s. monthly stock returns

AU - Green, Jeremiah Ross

AU - Hand, John R.M.

AU - Zhang, X. Frank

PY - 2017/12/1

Y1 - 2017/12/1

N2 - 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)

AB - 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)

UR - http://www.scopus.com/inward/record.url?scp=85029407643&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=85029407643&partnerID=8YFLogxK

U2 - 10.1093/rfs/hhx019

DO - 10.1093/rfs/hhx019

M3 - Article

AN - SCOPUS:85029407643

VL - 30

SP - 4389

EP - 4436

JO - Review of Financial Studies

JF - Review of Financial Studies

SN - 0893-9454

IS - 12

ER -