Conditioning information and cross-sectional anomalies

Recent empirical work suggests that predictability of future returns is related to a time-varying component that expected returns exhibit. In this paper, I use conditional asset pricing models to investigate whether return anomalies exhibit common dynamic patterns in returns. The prediction of a model might hinge on the specific interaction between its underlying state variables and considered portfolios. Using well known anomalies and alternative state variables I study such interaction. I document that different state variables identify similar time-varying behavior for the anomalies in extreme economic conditions, but such anomalies show no commonalities in their overall patterns. Copyright Springer Science+Business Media New York 2014