Widely used databases report stock returns that are measured at the monthly horizon, while investors participate in the markets over multiple months. Most academic studies report conditional or unconditional arithmetic means of the monthly returns. We describe the odd trading strategy...

Japanese stock returns are even more closely related to their book-to-market ratios than are their U.S. counterparts, and thus provide a good setting for testing whether the return premia associated with these characteristics arise because the characteristics are proxies for covariance with...

Firms that substantially increase capital investments subsequently achieve negative benchmark-adjusted returns. The negative abnormal capital investment/return relation is shown to be stronger for firms that have greater investment discretion, i.e., firms with higher cash flows and lower debt...

This study comprehensively reexamines the debate over behavioral and rational explanations for the investment effect in an updated sample. We closely follow the previous literature and provide several differences. All our tests include five prominent measures of corporate investment and...

The literature has provided mixed evidence on the relationship between cash holdings and average stock returns. We empirically verify that the relationship is positive and robust to the adjustment of risk, the construction of cash holdings portfolios, and the weighting scheme of portfolio...

We investigate the pricing of market volatility risk as a risk factor – the innovation risk and as a characteristic risk – the level risk. We find that the pricing of the country-level (local) market volatility risk factor is not robust across 21 developed markets and that the global market...

This paper offers a novel understanding of the cause of the external financing anomaly, a well established observation that net overall external financing activities and future stock returns are negatively related. Recent studies argue that the external financing anomaly is driven by earnings...

We study compound returns to nearly 62,000 global common stocks during the 1990 to 2018 period, documenting that the majority, 56% of US stocks and 61% of non-US stocks, under perform one-month US Treasury bills over the full sample. Focusing on aggregate shareholder wealth creation measured in...

Banks with higher equity risk and faster loan growth have lower abnormal stock returns. By disentangling ex ante cost of capital from cash flow and discount rate news in bank stock returns, we show that the lower returns do not suggest lower cost of capital. The underperformance of banks with...