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Cross-Section of Returns, Predictors Credibility, and Method Issues

Author

Listed:
  • Zhimin (Jimmy) Yu

    (Marilyn Davies College of Business, University Houston Downtown, Houston, TX 77002, USA)

Abstract

The paper focuses on the relationship between firms’ characteristics and cross-section returns. The author reviews and critically assesses the most recent contributions in the literature. After comparing the abnormal returns (Alpha) and t statistics of the original works with those of replication works, the author concludes that 94 characteristics are robust. The limitation of the paper is that measurement errors in the COMPUSTAT could affect the predictability of cross-section returns. The practical implication of the paper is that the author validates the practice of fundamental analysis. Investors could benefit from those discovered characteristics. The author validates the policy consequence and connects the theoretical frameworks with empirical results. The author evaluates the empirical methodology and proposes several methods to improve future research.

Suggested Citation

  • Zhimin (Jimmy) Yu, 2023. "Cross-Section of Returns, Predictors Credibility, and Method Issues," JRFM, MDPI, vol. 16(1), pages 1-12, January.
    • Handle: RePEc:gam:jjrfmx:v:16:y:2023:i:1:p:34-:d:1025770
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    References listed on IDEAS

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    Cited by:

    1. Cássio Roberto de Andrade Alves & Márcio Laurini, 2023. "Estimating the Capital Asset Pricing Model with Many Instruments: A Bayesian Shrinkage Approach," Mathematics, MDPI, vol. 11(17), pages 1-20, September.
    2. Pankaj Agrrawal, 2023. "The Gibbons, Ross, and Shanken Test for Portfolio Efficiency: A Note Based on Its Trigonometric Properties," Mathematics, MDPI, vol. 11(9), pages 1-19, May.

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