Regularities
The q theory of investment implies a purely characteristic-based expected-return model. Under constant return to scale, stock return equals investment return, which is tied directly with firm characteristics. We use a two-period example to show analytically that the investment-return equation is consistent with the relations of average returns with book-to-market, investment-toasset, and earnings surprises. Using GMM, we estimate the q-theoretic expected return model by minimizing the di_erences between average stock returns in the data and average unlevered investment returns. Our model captures quantitatively the average returns of portfolios sorted on investment-to-asset and on size and book-to-market, including the small-stock value premium. The model is also partially successful in matching the post-earnings-announcement drift and its higher magnitude in small firms.
Laura X.L.Liu Toni M.Whited Lu Zhang
School of Business and Management Hong Kong University of Science and Technology School of Business University of Wisconsin-Madiso Stephen M.Ross School of Business University of Michigan and NBER
国际会议
成都
英文
2007-07-09（万方平台首次上网日期，不代表论文的发表时间）