TY  - JOUR
AU  - Ferson,Wayne E.
AU  - Harvey,Campbell R.
TI  - Conditioning Variables and the Cross-Section of Stock Returns
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 7009
PY  - 1999
Y2  - March 1999
UR  - http://www.nber.org/papers/w7009
L1  - http://www.nber.org/papers/w7009.pdf
N1  - Author contact info:
Wayne E. Ferson
Department of Finance
and Business Economics
University of Southern California
3670 Trousdale Parkway Suite 308
Los Angeles, CA 90089-0804
Tel: 213/740-5615
Fax: 213/740-6650
E-Mail: ferson@marshall.usc.edu

Campbell R. Harvey
Duke University
Fuqua School of Business
Durham, NC 27708-0120
Tel: 919/660-7768
Fax: 919/660-8030
E-Mail: cam.harvey@duke.edu
AB  - Previous studies have identified predetermined variables that have some power to explain the time series of stock and bond returns.  This paper shows that loadings on the same variables also provide significant cross-sectional explanatory power for stock portfolio returns.  These loadings are important, over and the above the variables advocated by Fama and French (1993) in their three factor  model,' and also the four factors of Elton, Gruber and Blake (1995).  The explanatory power of the loadings on lagged variables is robust to various portfolio grouping procedures and other considerations.  The lagged variables reveal information about the cross-section of expected returns that is not captured by popular asset pricing factors.  These results carry implications for risk analysis, performance measurement, cost-of-capital calculations and other applications.
ER  -