Biases in decomposing holding-period portfolio returns

Weimin Liu, Norman Strong

Research output: Contribution to journalArticlepeer-review


A growing number of studies in finance decompose multiperiod portfolio returns into a series of single-period returns, using these to test asset pricing models or market efficiency or to evaluate the returns to investment strategies such as those based on momentum, size, and value-growth. We provide a formal analysis of the decomposition method. Crucially, we argue and present empirical evidence that some methods researchers use involve portfolios that nobody would seriously consider ex ante, that transactions costs associated with such portfolios make them poor investment vehicles, and that they can lead to spurious statistical inferences. © The Author 2006. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved.
Original languageEnglish
Pages (from-to)2243-2274
Number of pages31
JournalReview of Financial Studies
Issue number5
Publication statusPublished - Sept 2008


Dive into the research topics of 'Biases in decomposing holding-period portfolio returns'. Together they form a unique fingerprint.

Cite this