A New Look at Expected Stock Returns and Volatility

Critical Finance Review, Forthcoming

Posted: 26 Nov 2020 Last revised: 6 Jan 2021

See all articles by Russell P. Robins

Russell P. Robins

Tulane University - A.B. Freeman School of Business

Geoffrey Peter Smith

Arizona State University (ASU) - W.P. Carey School of Business

Date Written: October 7, 2020

Abstract

We replicate French, Schwert, and Stambaugh (1987) (FSS) with up-to-date data and new tools from the modern toolbox of econometric methods. As we proceed, we highlight the main technical details and econometric methods from the original study and, when necessary, update them. While our main goal is to replicate FSS as carefully as possible, we also aim to help new researchers quickly gain an in-depth understanding of the major features of the original study, and to demonstrate why FSS is fundamental to the asset pricing literature. We finish by text mining the titles and abstracts of over one thousand citing studies for information on why other studies cite FSS and which parts of FSS receive the most attention. After careful replication, we confirm that the main results in FSS hold and continue to hold through 2019.

Keywords: Volatility, Expected returns

JEL Classification: G10, G11, G12

Suggested Citation

Robins, Russell P. and Smith, Geoffrey Peter, A New Look at Expected Stock Returns and Volatility (October 7, 2020). Critical Finance Review, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3707123

Russell P. Robins

Tulane University - A.B. Freeman School of Business

7 McAlister Drive
New Orleans, LA 70118
United States

Geoffrey Peter Smith (Contact Author)

Arizona State University (ASU) - W.P. Carey School of Business ( email )

PO Box 873906
Tempe, AZ 85287-3706
United States

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