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File name: SSRN-id296643. ; Size: 507K
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What Do We Really Know About the Cross-Sectional Relation
Between Past and Expected Returns?
Mark Grinblatt
University of California, Los Angeles (UCLA) - Finance Area; Yale University - International Center for Finance; National Bureau of Economic Research (NBER)
Tobias J. Moskowitz
University of Chicago - Booth School of Business
December 2001
Yale ICF Working Paper No. 00-72
Abstract:
Multihorizon temporal relationships between stock returns are complex due to confounding sources of return premia, microstructure effects, and changes in the relationship over various horizons. We find the relation to be further complicated by the sign and consistency of the past return that also varies, somewhat sensibly, with the season and the tax environment. Accounting for these additional effects using a parsimonious technical trading rule generates surprisingly large abnormal returns, despite controlling for microstructure effects, transaction costs, and date-snooping biases. The documented variation in profits across stock characteristics, season, and tax environment appears inconsistent with existing theory, but may point to future explanations for the relation between past and expected returns.
Number of Pages in PDF File: 50
JEL Classification: G12, G14
working papers series
Download This Paper
Date posted: January 25, 2002
Suggested CitationGrinblatt, Mark and Moskowitz, Tobias J., What Do We Really Know About the Cross-Sectional Relation
Between Past and Expected Returns? (December 2001). Yale ICF Working Paper No. 00-72. Available at SSRN: http://ssrn.com/abstract=296643 or http://dx.doi.org/10.2139/ssrn.296643
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