Review of Financial Studies Vol. 31 No. 5 2018
Cross-Sectional and Time-Series Tests of Return Predictability: What Is the Difference?
Abstract
We compare the performance of time-series (TS) and cross-sectional (CS) strategies based on past returns. While CS strategies are zero-net investment long/short strategies, TS strategies take on a time-varying net long investment in risky assets. For individual stocks, the difference between the performances of TS and CS strategies is largely due to this time-varying net long investment. With multiple international asset classes with heterogeneous return distributions, scaled CS strategies significantly outperform similarly scaled TS strategies.
- Volume
- 31
- Issue
- 5
- Pages
- 1784-1824
- Sources
- bibtex:phds-export.bib