The Cross-Section of Stock Returns before CRSP

96 Pages Posted: 24 Nov 2021 Last revised: 10 Jun 2024

See all articles by Guido Baltussen

Guido Baltussen

Erasmus University Rotterdam (EUR); Northern Trust Corporation - Northern Trust Asset Management

Bart van Vliet

Erasmus University Rotterdam (EUR); Northern Trust Corporation - Northern Trust Asset Management

Pim van Vliet

Robeco Quantitative Investments

Date Written: February 7, 2023

Abstract

This study examines the cross-section of stock returns out-of-sample using a newly created database of U.S. stocks between 1866 and 1926. By augmenting price and dividend data for 1,488 stocks with hand-collected data on market capitalizations, this dataset significantly extends the traditional CRSP sample. Over the 'pre-CRSP' era the relationship between market beta and returns is flat, and most factor premia are sizable and significant. Machine learning methods validate these findings. Importantly, being unaffected by post-publication arbitrage we find that equity factor premia do not materially decay out-of-sample, addressing p-hacking concerns. Additionally, we explore economic explanations of factor premia over the combined pre-CRSP and CRSP samples covering 154 years of data.

Keywords: empirical asset pricing, return anomalies, factor premia, p-hacking, momentum, value, beta, low-risk, size, reversal, machine learning. JEL classification: G10, G11, N21, N22, quant investing

JEL Classification: G10, G11, N21, N22

Suggested Citation

Baltussen, Guido and van Vliet, Bart and van Vliet, Pim, The Cross-Section of Stock Returns before CRSP (February 7, 2023). Available at SSRN: https://ssrn.com/abstract=3969743 or http://dx.doi.org/10.2139/ssrn.3969743

Guido Baltussen (Contact Author)

Erasmus University Rotterdam (EUR) ( email )

Burgemeester Oudlaan 50
3000 DR Rotterdam, Zuid-Holland 3062PA
Netherlands

Northern Trust Corporation - Northern Trust Asset Management ( email )

50 South LaSalle Street
Chicago, IL 60603
United States

Bart Van Vliet

Erasmus University Rotterdam (EUR)

Burgemeester Oudlaan 50
3000 DR Rotterdam, Zuid-Holland 3062PA
Netherlands

Northern Trust Corporation - Northern Trust Asset Management ( email )

50 South LaSalle Street
Chicago, IL 60603
United States

Pim Van Vliet

Robeco Quantitative Investments ( email )

Rotterdam, 3011 AG
Netherlands

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