Firm-level variables that predict cross-sectional stock returns, such as price-to-earnings and short interest, are often averaged and used to predict market returns. Using various samples of cross-sectional predictors and accounting for the number of predictors and their interdependence, we find only weak evidence that cross-sectional predictors make good time-series predictors, especially out-of-sample. The results suggest that cross-sectional predictors do not generally contain systematic information.
No takes yet. Share an insight, caveat, or question.
Engelberg et al. (2022) studied this question.
Synapse has enriched 4 closely related papers on similar clinical questions. Consider them for comparative context: