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Persistent link: https://www.econbiz.de/10012537292
Previous studies show that the profitability-based factor can explain almost all asset pricing anomalies, highlighting the importance of firm profitability. This paper investigates both risk-based and behavioral-based explanations of the profitability premium itself. First, we show that the...
Persistent link: https://www.econbiz.de/10013038434
This paper studies the role of reference-dependent preferences in explaining several anomalies related to lottery-like assets. Recent studies find that lottery-like assets significantly underperform non-lottery-like assets, probably due to investors' unconditional preference for lottery-like...
Persistent link: https://www.econbiz.de/10012904131
Recent models of the value premium typically endogenously link B/M to firm-specific attributes. The value firms earn higher subsequent returns because these firms command a higher risk premium due to a higher default probability, lower profitability, higher operating leverage, shorter cash flow...
Persistent link: https://www.econbiz.de/10013067847
We propose a novel measure of investment plans, namely, expected investment growth (EIG) and find stocks with high EIG outperform stocks with low EIG by 17% per annum. This premium can be generated in a neoclassical model with the investment plan friction, in which a firm's expected returns...
Persistent link: https://www.econbiz.de/10012852077
Recent studies have proposed a large set of powerful characteristics-based factors in the stock market. This study examines the pricing of these factors using portfolios that are formed by directly sorting stocks based on their exposure to these factors. These beta-sorted portfolios have very...
Persistent link: https://www.econbiz.de/10012852992
Using portfolios that are formed by directly sorting stocks based on their exposure to characteristics-based factors, earlier studies find that these beta-sorted portfolios have very large ex post factor beta spreads. However, the return spreads between high- and low-beta firms are typically...
Persistent link: https://www.econbiz.de/10012841821
This study investigates the impact of return extrapolation on risk-return trade-offs in both the aggregate time series and the cross section of stocks. We find that the relation between the market’s expected return and expected variance is positive during periods with a low degree of...
Persistent link: https://www.econbiz.de/10013297977
This paper proposes a simple dynamic asset pricing model featuring extrapolative market participation by retail investors, that is, increased market participation following high returns in the stock market and high new participation growth (NPG). The model implies that extrapolative market...
Persistent link: https://www.econbiz.de/10013405309
Persistent link: https://www.econbiz.de/10009958679