The Characteristics that Provide Independent Information about Average U.S. Monthly Stock Returns
80 Pages Posted: 9 May 2013 Last revised: 16 Oct 2016
Date Written: October 14, 2016
We take up Cochrane’s (2011) challenge to identify the firm characteristics that provide independent information about average U.S. monthly stock returns by simultaneously including 94 characteristics in Fama-MacBeth regressions that avoid overweighting microcaps and adjust for data snooping bias. We find that while 12 characteristics are reliably independent determinants in non-microcap stocks during 1980-2014 as a whole, return predictability fell sharply in 2003 such that just two characteristics have been independent determinants since then. Outside of microcaps, the hedge returns to exploiting characteristics-based predictability have also been insignificantly different from zero since 2003.
Keywords: Firm characteristics; anomalies; cross-section; average U.S. monthly returns
JEL Classification: G1, M4
Suggested Citation: Suggested Citation