For best experience please turn on javascript and use a modern browser!

"New and Old Characteristic-Sorted Portfolios: Implications for Asset Pricing"

Detail Summary
Date 13 February 2020
Time 13:00 - 14:15
Location Roeterseilandcampus - building M
Room M3.02

Abstract:* 

We study the returns to characteristic-sorted portfolios up to five years after portfolio information. Among a set of 56 characteristics, we find large pricing errors between the contemporaneous returns of new and old sorts, where new sorts use only the most recent observations of firm characteristics. These relative pricing errors are not captured by existing asset pricing models and have been overlooked by standard tests using only returns to new sorts. Thus, pricing errors across horizons provide new and powerful information to test asset pricing models. Further, we show that these pricing errors are strongly related to a characteristic’s market beta and connected to the difference in return between new and old stocks in the characteristic-sorted portfolios. We argue that investors can improve the performance of characteristic-based strategies by considering past observations of firm characteristics.

*Co-authored with Fahiz Baba Yara (Nova SBE), Andrea Tamoni (Rutgers Business School)

Personal Page Martijn Boons

Please register by email, if you want to attend the seminar.

Roeterseilandcampus - building M
Roeterseilandcampus - building M

Room M3.02

Plantage Muidergracht 12
1018 TV Amsterdam