dc.contributor.author | Lyle, Matthew R. | |
dc.contributor.author | Wang, Changyi Chang-Yi | |
dc.date.accessioned | 2015-06-05T17:32:20Z | |
dc.date.issued | 2015 | |
dc.identifier.citation | Lyle, Matthew R., and Charles C.Y. Wang. "The Cross Section of Expected Holding Period Returns and Their Dynamics: A Present Value Approach." Journal of Financial Economics 116, no. 3 (June 2015): 505–525. | en_US |
dc.identifier.issn | 0304-405X | en_US |
dc.identifier.uri | http://nrs.harvard.edu/urn-3:HUL.InstRepos:16176604 | |
dc.description.abstract | We provide a tractable model of firm-level expected holding period returns using two firm fundamentals—book-to-market ratio and ROE—and study the cross-sectional properties of the model-implied expected returns. We find that 1) firm-level expected returns and expected profitability are time-varying but highly persistent; 2) forecasts of holding period returns strongly predict the cross section of future returns up to three years ahead. We document a highly significant predictive pooled regression slope for future quarterly returns of 0.86, whereas the popular factor-based expected return models have either an insignificant or a significantly negative association with future returns. In supplemental analyses, we show that these forecasts are also informative of the time-series variation in aggregate conditions: 1) for a representative firm, the slope of the conditional expected return curve is more positive in good times, when expected short-run returns are relatively low; 2) the model-implied forecaster of aggregate returns exhibits modest predictive ability. Collectively, we provide a simple, theoretically motivated, and practically useful approach to estimating multi-period ahead-expected returns. | en_US |
dc.language.iso | en_US | en_US |
dc.publisher | Elsevier | en_US |
dc.relation.isversionof | http://www.sciencedirect.com/science/article/pii/S0304405X15000252 | en_US |
dash.license | OAP | |
dc.subject | valuation | en_US |
dc.subject | investment return | en_US |
dc.title | The Cross Section of Expected Holding Period Returns and Their Dynamics: A Present Value Approach | en_US |
dc.type | Journal Article | en_US |
dc.description.version | Author's Original | en_US |
dc.relation.journal | Journal of Financial Economics | en_US |
dash.depositing.author | Wang, Changyi Chang-Yi | |
dc.date.available | 2015-06-05T17:32:20Z | |
dc.identifier.doi | 10.1016/j.jfineco.2015.03.001 | |
dash.contributor.affiliated | Wang, Charles | |