Some Further Asset Pricing Tests Using Information Variables: Portfolios vs Individual Stocks

Abstract

Recent evidence has documented a predictable component in stock returns which is particularly large at low frequencies (see for example Fama and French [1099] and [1989]). Most previous studies have examined the predictability of bond portfolios, stock indices, size deciles and industry portfolios. A question which follows from these studies is the predictability of individual stock returns using the same information variables. Of particular concern is the stability of the predictive regression coefficients through time for individual stocks.