Conditioning Variables and the Cross-Section of Stock Returns

Wayne Ferson () and Campbell Harvey ()

No 7009, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Previous studies have identified predetermined variables that have some power to explain the time series of stock and bond returns. This paper shows that loadings on the same variables also provide significant cross-sectional explanatory power for stock portfolio returns. These loadings are important, over and the above the variables advocated by Fama and French (1993) in their three factor model,' and also the four factors of Elton, Gruber and Blake (1995). The explanatory power of the loadings on lagged variables is robust to various portfolio grouping procedures and other considerations. The lagged variables reveal information about the cross-section of expected returns that is not captured by popular asset pricing factors. These results carry implications for risk analysis, performance measurement, cost-of-capital calculations and other applications.

JEL-codes: G0 G1 (search for similar items in EconPapers)
Date: 1999-03
New Economics Papers: this item is included in nep-cfn and nep-fmk
Note: AP
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (348)

Published as Journal of Finance, Vol. 54 (1999): 1325-1360.

Downloads: (external link)
http://www.nber.org/papers/w7009.pdf (application/pdf)

Related works:
Journal Article: Conditioning Variables and the Cross Section of Stock Returns (1999)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:7009

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w7009

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().