This paper proposes a time series decomposition of book-to-market ratio (BM) into a trend component and an innovation component (I_BM). Under the framework of stock valuation with growth options, we demonstrate that I_BM is negatively related to the change of growth options and therefore...

This paper revisits the yield spread's usefulness for predicting future real GDP growth. We show that the contribution of the spread can be decomposed into the effect of expected future changes in short rates and the effect of the term premium. We find that both factors are relevant for...

We study the liquidity exposures of value and growth stocks over business cycles. In worst times, value stocks have higher liquidity betas than in best times, while the opposite holds for growth stocks. Small value stocks have higher liquidity exposures than small growth stocks in worst times,...