The Cross-Section of Stock Returns before CRSP

94 Pages Posted: 24 Nov 2021 Last revised: 8 Feb 2023

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

We comprehensively study the cross-section of stock returns out-of-sample using a novel constructed database of U.S. stocks between 1866-1926. Results over this ‘pre-CRSP’ era generally confirm post-1926 CRSP results. The relationship between market beta and returns is flat, the size premium is weak, and momentum, value, and low-risk premia are sizable positive and significant. Importantly, these factor premia do not decay significantly out-of-sample. In addition, we explore recent machine learning models and explanations of factor premia. Overall, we show that findings in the existing literature on traditional equity factors are robust.

Keywords: empirical asset pricing, return anomalies, machine learning, factor premiums, p-hacking, momentum, value, beta, low volatility, size

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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