Working Paper: NBER ID: w8744
Authors: Mark Grinblatt; Tobias J. Moskowitz
Abstract: Multihorizon temporal relationships between stock returns are complex due to confounding sources of return premia, microstructure effects, and changes in the relationship over various horizons. We find the relation to be further complicated by the sign and consistency of the past return that also varies, somewhat sensibly, with the season and the tax environment. Accounting for these additional effects using a parsimonious technical trading rule generates surprisingly large abnormal returns, despite controlling for microstructure effects, transaction costs, and data-snooping biases. The documented variation in profits across stock characteristics, season, and tax environment appear inconsistent with existing theory, but may point to future explanations for the relation between past and expected returns.
Keywords: No keywords provided
JEL Codes: G0; G1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| past returns (G17) | expected returns (G17) |
| microstructure effects (F12) | expected returns (G17) |
| seasonality of returns (G17) | expected returns (G17) |
| transaction costs (D23) | expected returns (G17) |