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Regularities / Laura X. L. Liu, Toni Whited, Lu Zhang.
- Format:
- Book
- Author/Creator:
- Liu, Laura X. L.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w13024.
- NBER working paper series no. w13024
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2007.
- Summary:
- The neoclassical q-theory is a good start to understand the cross section of returns. Under constant return to scale, stock returns equal levered investment returns that are tied directly with characteristics. This equation generates the relations of average returns with book-to-market, investment, and earnings surprises. We estimate the model by minimizing the differences between average stock returns and average levered investment returns via GMM. Our model captures well the average returns of portfolios sorted on capital investment and on size and book-to-market, including the small-stock value premium. Our model is also partially successful in capturing the post-earnings-announcement drift and its higher magnitude in small firms.
- Notes:
- Print version record
- April 2007.
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