Articlehybrid2022

Do Cross-Sectional Predictors Contain Systematic Information?

R. David McLean · Jeffrey Pontiff · Matthew C. Ringgenberg

39 citations0/0 files storedJournal of Financial and Quantitative Analysis

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Financial Markets and Investment Strategies Financial Analysis and Corporate Governance Stock Market Forecasting Methods

Abstract

Abstract Firm-level variables that predict cross-sectional stock returns, such as price-to-earnings and short interest, are often averaged and used to predict market returns. Using various samples of cross-sectional predictors and accounting for the number of predictors and their interdependence, we find only weak evidence that cross-sectional predictors make good time-series predictors, especially out-of-sample. The results suggest that cross-sectional predictors do not generally contain systematic information.

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References

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