The Cross Section Of Expected Returns And Its Relation To Past Returns: New Evidence
University of California, Los Angeles (UCLA) - Finance Area; Yale University - International Center for Finance; National Bureau of Economic Research (NBER)
Tobias J. Moskowitz
AQR Capital; University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)
CRSP Working Paper No. 503; Yale ICF Working Paper No. 99-09
This paper parsimoniously characterizes how past returns affect the cross-section of expected returns. Using Fama-MacBeth regressions, it shows that the momentum and reversals associated with past returns over various horizons are strongly affected by a turn-of-the-year seasonal that differs for winners and losers, depending on both the tax environment and the month of the year, and differs by exchange listing. The analysis also uncovers a consistent winners effect - high fractions of positive return months tend to increase expected returns. Out-of-sample evidence suggests that the documented relation between past returns and expected returns cannot entirely be due to data snooping biases.
Number of Pages in PDF File: 42
JEL Classification: G12, G14
Date posted: October 20, 1999
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