Cross-sectional and time-series tests of return predictability : what is the difference?

Amit Goyal; Narasimhan Jegadeesh

We compare the performance of time-series (TS) and cross-sectional (CS) strategies based on past returns. While CS strategies are zero-net investment long/short strategies, TS strategies take on a time-varying net-long investment in risky assets. For individual stocks, the difference between the performances of TS and CS strategies is largely due to this time-varying net-long investment. With multiple international asset classes with heterogeneous return distributions, scaled CS strategies significantly outperform similarly scaled TS strategies

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Year of publication:	2015
Authors:	Goyal, Amit ; Jegadeesh, Narasimhan
Publisher:	Geneva : Swiss Finance Institute
Subject:	Momentum \| market timing \| return predictability \| Kapitaleinkommen \| Capital income \| Prognoseverfahren \| Forecasting model \| Portfolio-Management \| Portfolio selection \| Zeitreihenanalyse \| Time series analysis \| Schätzung \| Estimation \| Kapitalmarktrendite \| Capital market returns

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