Bali and Cakici (2006) find no relation between equally-weighted portfolio returns and idiosyncratic risk, whereas Ang et al. (2006a) report a negative relation between value-weighted portfolio returns and idiosyncratic risk. Our analyses demonstrate that both findings can be explained by short-term monthly return reversals. The abnormal positive returns from taking a long (short) position in t...

This paper empirically examines the relation between the expected stock return and the bid-ask spread. Using the same portfolio formation method as in Amihud and Mendelson (1986) but different test methodologies, we do not find any clear reliable relation between the CAPM risk-adjusted return and the relative bid-ask spread. Our empirical results are more consistent with the conclusions of Cons...

We develop and implement a rigorous analytical framework for empirically evaluating the relative performance of firm-level expected-return proxies (ERPs), based on the premise that superior proxies should closely track true expected returns both cross-sectionally and over time (that is, the proxies should exhibit lower measurementerror variances). We then compare five classes of ERPs nominated ...