Profitability and Stock Returns in Production-Based Asset Pricing with Decreasing Returns to Scale
Production decisions provide a credible indicator of future costs of capital perceived by corporate insiders and so may forecast future stock returns. We find that, under decreasing returns to scale, investment returns correlate imperfectly with stock returns and that higher profitability and traditional value are both associated with higher chosen risk exposure. Capital investment and utilization predict profitability and future returns. Empirically, utilization approximated by electricity usage has clear forecast power for returns, complementing the established forecast power of investment. In addition, book-to-market ratios forecast returns, with specific predicted exceptions. The production-based model with decreasing returns predicts costs of capital better than traditional asset pricing models
Year of publication: |
2013
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Authors: | Balvers, Ronald J. |
Other Persons: | Gu, Li (contributor) ; Huang, Dayong (contributor) |
Publisher: |
[2013]: [S.l.] : SSRN |
Subject: | Theorie | Theory | Kapitaleinkommen | Capital income | CAPM | Skalenertrag | Returns to scale | Börsenkurs | Share price |
Saved in:
freely available
Extent: | 1 Online-Ressource (51 p) |
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Type of publication: | Book / Working Paper |
Language: | English |
Notes: | Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments June 20, 2013 erstellt |
Other identifiers: | 10.2139/ssrn.2279622 [DOI] |
Classification: | G12 - Asset Pricing |
Source: | ECONIS - Online Catalogue of the ZBW |
Persistent link: https://www.econbiz.de/10013080553
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