This dissertation consists of three independent papers. The third paper proposes an explanation for the empirically documented relation between the value factor and the investment factor of the Fama-French five-factor model: Investors observing that a firm decreases its investment perceive the...

A simple manipulation of the dividend discount model establishes that firms' book-to-market, profitability, and investment are related to their expected returns. This insight motivates the value, profitability, and investment factors in the Fama-French (2015) five-factor model. Yet, variation in...

We argue that the value factor's strong relation to the investment factor, being responsible for the value factor's documented redundancy, arises because book-to-market and investment are both driven by cash flow and discount rate shocks. Our results are consistent with this thesis: only market...