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Dissecting Market Expectations in the Cross-Section of Book-to-Market Ratios: A Comment

Author

Listed:
  • Bryan Kelly
  • Seth Pruitt

Abstract

Souza (2022) replicates the findings of Kelly and Pruitt (2013), then critiques their findings with alternative empirical choices. We challenge this critique, and argue that the choices of Kelly and Pruitt (2013, 2015) are the natural economic and statistical choices. The attenuation of predictability in Souza’s (2022) empirical analysis is due primarily to a number of ill-advised implementation choices. We conclude that the results of Kelly and Pruitt (2013) are notably robust in the sample following publication of their paper.

Suggested Citation

  • Bryan Kelly & Seth Pruitt, 2022. "Dissecting Market Expectations in the Cross-Section of Book-to-Market Ratios: A Comment," Critical Finance Review, now publishers, vol. 11(2), pages 375-381, May.
    • Handle: RePEc:now:jnlcfr:104.00000114
    DOI: 10.1561/104.00000114
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    More about this item

    Keywords

    Return prediction; Present value model; Partial least squares; Three-pass regression filter;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy

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