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The Cross Section Of Expected Returns And Its Relation To Past Returns: New Evidence

42 Pages Posted: 20 Oct 1999  

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

Yale University, Yale SOM; AQR Capital; National Bureau of Economic Research (NBER)

Date Written: October 1999

Abstract

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.

JEL Classification: G12, G14

Suggested Citation

Grinblatt, Mark and Moskowitz, Tobias J., The Cross Section Of Expected Returns And Its Relation To Past Returns: New Evidence (October 1999). CRSP Working Paper No. 503; Yale ICF Working Paper No. 99-09. Available at SSRN: https://ssrn.com/abstract=188608 or http://dx.doi.org/10.2139/ssrn.188608

Mark Grinblatt

University of California, Los Angeles (UCLA) - Finance Area ( email )

Los Angeles, CA 90095-1481
United States
310-825-1098 (Phone)
310-206-5455 (Fax)

Yale University - International Center for Finance

Box 208200
New Haven, CT 06520-8200
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Tobias J. Moskowitz (Contact Author)

Yale University, Yale SOM ( email )

New Haven, CT 06520
United States

HOME PAGE: http://som.yale.edu/tobias-j-moskowitz

AQR Capital ( email )

Greenwich, CT
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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