We study the determinants of corporate investment growth in the U.S. We use accounting identities to develop a system in which unexpected changes in investment growth are decomposed into surprises to current earnings growth, surprises to current stock returns, revisions of expectations about...

The investment theory, in which the expected return varies cross-sectionally with investment, expected profitability, and expected growth, is a good start to understanding Graham and Dodd's (1934) Security Analysis. Empirically, the q^5 model goes a long way toward explaining prominent equity...

Two innovations in the structural investment model go a long way in explaining value and momentum jointly. Firm-level investment returns are constructed from firm-level accounting variables, and are then aggregated to the portfolio level to match with portfolio-level stock returns. In addition,...

The investment theory, in which the expected return varies cross-sectionally with investment, expected profitability, and expected growth, is a good start to understanding Graham and Dodd's (1934) Security Analysis. Empirically, the q^5 model goes a long way toward explaining prominent equity...

A detailed treatment of aggregation and capital heterogeneity substantially improves the performance of the investment CAPM. Firm-level predicted returns are constructed from firm-level accounting variables and aggregated to the portfolio level to match with portfolio-level stock returns....

We derive and test q-theory implications for cross-sectional stock returns. Under constant returns to scale, stock 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...

We derive and test q-theory implications for cross-sectional stock returns. Under constant returns to scale, stock 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...

A deep-ingrained doctrine in asset pricing says that if an empirical characteristic-return relation is consistent with investor “rationality,” the relation must be “explained” by a risk (factor) model. The investment approach questions the doctrine. Factors formed on characteristics are...