We found a match
Your institution may have access to this item. Find your institution then sign in to continue.
- Title
Firm Characteristics and Stock Returns: The Role of Investment-Specific Shocks.
- Authors
Kogan, Leonid; Papanikolaou, Dimitris
- Abstract
Average return differences among firms sorted on valuation ratios, past investment, profitability, market beta, or idiosyncratic volatility are largely driven by differences in exposures of firms to the same systematic factor related to embodied technology shocks. Using a calibrated structural model, we show that these firm characteristics are correlated with the ratio of growth opportunities to firm value, which affects firms' exposures to capital-embodied productivity shocks and risk premia. We thus provide a unified explanation for several apparent anomalies in the cross-section of stock returns—namely, predictability of returns by these firm characteristics and return comovement among firms with similar characteristics.
- Subjects
MATHEMATICAL models; STOCK prices; RATE of return -- Mathematical models; PROFITABILITY; ECONOMIC shock; MARKET volatility; RISK premiums
- Publication
Review of Financial Studies, 2013, Vol 26, Issue 11, p2718
- ISSN
0893-9454
- Publication type
Article
- DOI
10.1093/rfs/hht026