The Cross-Section of Expected Stock Returns: What Have We Learnt from the Past Twenty-Five Years of Research?
European Financial Management, Forthcoming
47 Pages Posted: 26 Aug 2009 Last revised: 30 Sep 2009
Date Written: August 24, 2009
I review the recent literature on cross-sectional predictors of stock returns. Predictive variables used emanate from informal arguments, alternative tests of risk-return models, behavioral biases, and frictions. More than fifty variables have been used to predict returns. The overall picture, however, remains murky, because more needs to be done to consider the correlational structure amongst the variables, use a comprehensive set of controls, and discern whether the results survive simple variations in methodology.
Keywords: market efficiency, cross-section of stock returns
JEL Classification: G12, G14
Suggested Citation: Suggested Citation