The History of the Cross Section of Stock Returns / Juhani T. Linnainmaa, Michael R. Roberts.

Format:

Book

Author/Creator:

Linnainmaa, Juhani T.

Contributor:

National Bureau of Economic Research.

Roberts, Michael R.

Series:

Working Paper Series (National Bureau of Economic Research) no. w22894.

NBER working paper series no. w22894

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2016.

Summary:

Using data spanning the 20th century, we show that most accounting-based return anomalies are spurious. When examined out-of-sample by moving either backward or forward in time, anomalies' average returns decrease, and volatilities and correlations with other anomalies increase. The data-snooping problem is so severe that even the true asset pricing model is expected to be rejected when tested using in-sample data. Our results suggest that asset pricing models should be tested using out-of-sample data or, when not feasible, by whether a model is able to explain half of the in-sample alpha.

Notes:

Print version record

December 2016.