This paper provides a comprehensive examination of whether portfolios formed on capital asset pricing model anomalies capture information related to changes in the investment opportunity set and therefore may appropriate candidates as state variables within Merton's (1973) ICAPM framework....

The level of firm investment, along with firm profitability, has been shown to be empirically powerful asset pricing factors in the US and other markets. The q-factor model of Hou, Xue, and Zhang (2014), and the 5-factor model of Fama and French (2014a), both rely on factors capturing the...

This paper provides a comprehensive examination of whether portfolios formed on capital asset pricing model anomalies capture information related to changes in the investment opportunity set and therefore may be appropriate candidates as state variables within Merton's (1973) ICAPM framework....

Recent theory relates expected returns and covariant risk to the investment decisions of a firm. The irreversible nature of physical assets-in-place results in them being riskier than growth options across certain stages of the business cycle. Using the Australian accounting environment, this...

Zhang (2005) and Cooper (2006) provide a theoretical risk-based explanation for the value premium by suggesting a nexus between firms' book-to-market ratio and investment irreversibility. They argue that unproductive physical capacity is costly in contracting conditions, but provides growth...