Variables with strong marginal explanatory power in cross-section asset pricing regressions typically show less power to produce increments to average portfolio returns, for two reasons. (i) Adding an explanatory variable can attenuate the slopes in a regression. (ii) Adding a variable with...

We use bootstrap simulations to examine the properties of long-horizon U.S. stock market returns. Distributions of continuously compounded returns converge toward normal distributions as we extend the horizon from one to 30 years, and distributions of dollar payoffs converge toward lognormal. We...