The Cross Section of Expected Stock Returns

  title={The Cross Section of Expected Stock Returns},
  author={J. Lewellen},
  journal={Econometrics: Single Equation Models eJournal},
  • J. Lewellen
  • Published 2014
  • Business
  • Econometrics: Single Equation Models eJournal
  • This paper studies the cross-sectional properties of return forecasts derived from Fama-MacBeth regressions. These forecasts mimic how an investor could, in real time, combine many firm characteristics to obtain a composite estimate of a stock’s expected return. Empirically, the forecasts vary substantially across stocks and have strong predictive power for actual returns. For example, using ten-year rolling estimates of Fama-MacBeth slopes and a cross-sectional model with 15 firm… CONTINUE READING
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