I propose a neoclassical production economy with costly external financing, partial investment irreversibility, and endogenous investment/financing decisions to rationalize and quantify the well-documented interaction between the book-to-market equity effect and the financial leverage effect in...

Using data from the stock markets of Japan, the U.K, and France, this paper examines the distribution and source of value premium in average stock returns for the period 1975 through 2007. Results from this study indicate a January effect in value premium, which is valid and economically...

This paper quantifies the relative importance of labor-induced operating leverage at explaining the value premium. I extend a traditional variance decomposition methodology using labor shares to disentangle labor leverage from the value premium and from the value spread and from the variation in...

Despite accounting conservatism and indicating the firm's required return exceeds its return on equity, equity book values greater than market values (BTM 1) are not rare. The question we address is why. We find BTM 1 is pervasive and persistent. More importantly, BTM 1 is not attributable to...