What is the cross section of expected stock returns?

Each month the cross-section of returns on stocks is regressed on variables hypothesized to explain expected returns. The time- series means of the monthly regression slopes then provide standard tests of whether different explanatory variables are on average priced.

What does cross section of returns mean?

Cross section: How average returns change across different stock or portfolios.

What determines stock return?

In summary, the key fundamental factors are as follows: The level of the earnings base (represented by measures such as EPS, cash flow per share, dividends per share) The expected growth in the earnings base. The discount rate, which is itself a function of inflation.

What is cross-sectional variation?

Cross-sectional data, or a cross section of a study population, in statistics and econometrics, is a type of data collected by observing many subjects (such as individuals, firms, countries, or regions) at the one point or period of time. The analysis might also have no regard to differences in time.

What is cross-sectional regression analysis?

In statistics and econometrics, a cross-sectional regression is a type of regression in which the explained and explanatory variables are all associated with the same single period or point in time.

What is cross-sectional data examples?

Cross-sectional data refer to observations of many different individuals (subjects, objects) at a given time, each observation belonging to a different individual. A simple example of cross-sectional data is the gross annual income for each of 1000 randomly chosen households in New York City for the year 2000.

What is cross sectional model?

Cross-sectional models estimate stock returns from a set of variables that are specific to each company, rather than through factors that are common across all stocks. Cross-sectional models use stock-specific factors that are based on fundamental and technical data.

What are stock returns?

Stock Return is the calculation of percent rate of return over a measurement period. The calculation requires several inputs, share price gains or losses; corporate actions like splits and spin-offs; and finally returns of capital in the form of special and regular dividends. Synonym: total return.

What factors might affect stock returns?

Factors that can affect stock prices

  • news releases on earnings and profits, and future estimated earnings.
  • announcement of dividends.
  • introduction of a new product or a product recall.
  • securing a new large contract.
  • employee layoffs.
  • anticipated takeover or merger.
  • a change of management.
  • accounting errors or scandals.

What is cross-sectional in statistics?