Journal of Financial and Quantitative Analysis Vol. 58 No. 3 2023

Do Cross-Sectional Predictors Contain Systematic Information?

Joseph Engelberg¹; R. David McLean²; Jeffrey Pontiff³; Matthew C. Ringgenberg⁴

¹ University of California San Diego · ² Georgetown University · ³ Boston College · ⁴ University of Utah

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.

DOI

10.1017/s0022109022000266

Volume

58

Issue

3

Pages

1172-1201

Language

en

Sources

bibtex:phds-export.bib openalex crossref

Cite

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