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Investment Horizon and the Cross Section of Expected Returns: Evidence from the Tokyo Stock Exchange

Author

Listed:
  • Pin-Huang Chou

    (Department of Finance, National Central University)

  • Yuan-Lin Hsu

    (Department of Finance, National Chengchi University)

  • Guofu Zhou

    (Olin School of Business, Washington University)

Abstract

Using data from the Tokyo Stock Exchange, we study how beta, size, and ratio of book to market equity (BE/ME) account for the cross-section of expected stock returns over different lengths of investment horizons. We find that $\beta$, adjusted for infrequent trading or not, fails to explain the cross-section of monthly expected returns, but does a much better job for horizons over half- and one-year. However, either the size or the BE/ME alone is still a significant factor in explaining the cross-section expected returns, but the size significance diminishes for longer horizons when $\beta$ is included as an additional independent variable.

Suggested Citation

  • Pin-Huang Chou & Yuan-Lin Hsu & Guofu Zhou, 2000. "Investment Horizon and the Cross Section of Expected Returns: Evidence from the Tokyo Stock Exchange," Annals of Economics and Finance, Society for AEF, vol. 1(1), pages 79-100, May.
    • Handle: RePEc:cuf:journl:y:2000:v:1:i:1:p:79-100
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    More about this item

    Keywords

    Investment horizon; Beta; Size; Book-to-market equity; CAPM;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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