returns equal levered investment returns, which are tied directly to firm characteristics. When we use GMM to match average … levered investment returns to average observed stock returns, the model captures the average stock returns of portfolios … sorted by earnings surprises, book-to-market equity, and capital investment. When we try to match expected returns and return …

returns equal levered investment returns, which are tied directly to firm characteristics. When we use GMM to match average … levered investment returns to average observed stock returns, the model captures the average stock returns of portfolios … sorted by earnings surprises, book-to-market equity, and capital investment. When we try to match expected returns and return …

the four HXZ factors, namely size, profitability, and investment, cannot be explained by the five FF factors; (4) the best … as follows: (1) neither the FF investment factor nor the HXZ investment factor earns a significant return in the Chinese … profitability factor; (5) the maximum Sharpe ratio is achieved by investing about 5% in the market factor, 20% in the value factor …

We find that aggregate profitability and asset investment exhibit robust joint predictive power for aggregate excess … stock returns, consistent with the investment model of Hou, Xue, and Zhang (henceforth HXZ, 2015). These results provide out … used to explain variation that is market-wide in nature. Also consistent with the HXZ investment model, we find that the …

also reveal that our factor model with country fundamentals performs better than a factor model with usual investment … gap between country fundamentals and practitioners’ strategies on currency investment. …