The Cross Section of Expected Returns and its Relation to Past Returns: New Evidence
This paper parsimoniously characterizes how past returns affect the cross-section of expected returns. Using Fama-MacBeth regressions, it shows that the momentum and reversals associated with past returns over various horizons are strongly affected by a turn-of-the-year seasonal that differs for winter and losers, depending on both the tax environment and the month of the year, and differs by exchange listing. The analysis also uncovers a consistent winners effect â€“ high fractions of positive return months tend to increase expected returns. Out-of-sample evidence suggests that the documented relation between past returns and expected returns cannot entirely be due to data snooping biases.
(This abstract was borrowed from another version of this item.)
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Web page: http://gsbwww.uchicago.edu/fac/finance/papers/
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