Increased use of expectational data for modeling stock returns places a spotlight on the specification of predictor variables. Choices between alternative specifications of a given predictor such as E/P or earnings trend, for example, can have wide-ranging effects on portfolio selection and...

More than three decades ago, Jacobs and Levy introduced in the Financial Analysts Journal the idea of disentangling returns across numerous factors via cross-sectional analysis, and examined the benefits of using the time-series of returns to disentangled factors for return forecasting. The...