Clean-surplus accounting implies that a firm's stock return can be decomposed into a function of the firm's return on equity, book-to-market equity ratio, and dividend-price ratio. Consequently, the variation in these ratios across firms should be indicative of cross-sectional variation in...

It is well established that firms that undertake high levels of capital investment relative to their scale of operations, as measured by total assets, sales, or similar criteria, tend to have lower subsequent stock returns than firms with the opposite characteristic. Intuitively, this finding is...