Stock Returns and the Miller-Modigliani Valuation Formula: Revisiting the Fama-French Analysis

Aharoni, Gil; Grundy, Bruce D.; Zeng, Qi

doi:10.2139/ssrn.1800603

Cited by 40 publications

(38 citation statements)

References 2 publications

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“…However, Aharoni et al . () report a negative relationship, and attribute the difference to firm‐level variables, as opposed to per share variables in Fama and French.…”

mentioning

confidence: 99%

The Investment CAPM

Zhang

2017

Euro Fin Management

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A new class of Capital Asset Pricing Models (CAPM) arises from the first principle of real investment for individual firms. Conceptually as ‘causal’ as the consumption CAPM, yet empirically more tractable, the investment CAPM emerges as a leading asset pricing paradigm. Firms do a good job in aligning investment policies with costs of capital, and this alignment drives many empirical patterns that are anomalous in the consumption CAPM. Most important, integrating the anomalies literature in finance and accounting with neoclassical economics, the investment CAPM has succeeded in mounting an efficient markets counterrevolution to behavioural finance over the past 15 years.

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“…However, Aharoni et al . () report a negative relationship, and attribute the difference to firm‐level variables, as opposed to per share variables in Fama and French.…”

mentioning

confidence: 99%

The Investment CAPM

Zhang

2017

Euro Fin Management

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“…We follow Bessembinder and Zhang () and implement a regression model to investigate the effects of firm characteristics on the long‐run stock returns of our sample groups from Table from March 2000 until December 2012. We consider nine characteristics that have been shown to be associated with average stock returns: market Beta (Sharpe, ; Lintner, ; Mossin, ), size (Banz, ), book‐to‐market (Rosenberg, Reid and Lanstein, ), momentum (Jegadeesh, ; Lehmann, ; Jegadeesh and Titman, ; Chan, Jegadeesh and Lakonishok, ; Novy‐Marx, ), illiquidity (Amihud, ), gross profitability (Novy‐Marx, ), investment (Aharoni, Grundy and Zeng, ), idiosyncratic volatility (Goyal and Santa‐Clara, ; Bali, Cakici, Yan and Zhang, ; Ang, Hodrick, Xing and Zhang, , ; Chen and Petkova, ), and expected idiosyncratic skewness (Boyer, Mitton and Vorkink, ).…”

Section: Methodologies Of Empirical Analysismentioning

confidence: 99%

A Long‐Run Performance Perspective on the Technology Bubble

Franke¹,

Löffler²

2018

The Financial Review

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The events surrounding the stock price peak of March 2000 are commonly interpreted as the bursting of a technology or Internet bubble, with some researchers pointing out that the pattern could also arise in fundamental models. We inform the debate by studying the long‐run performance of Internet and technology stocks from March 2000 onward. Using calendar‐time regressions, we do not find conclusive evidence of negative abnormal returns. The results are consistent with a new interpretation of the events; namely, the price drop of the early 2000s was not warranted in light of future cash flows and risk.

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“…Another highly popular anomaly is the ‘low‐risk’ ( L ) anomaly, originally discovered by Aharoni et al . (). Empirically, low‐beta stocks exhibit higher returns than implied by their market beta.…”

Section: Datamentioning

confidence: 97%

“…Among the most recent findings are the ‘quality’ premium as defined by profitability, growth, safety, or payout prevail anomalies . Consequently, Fama & French () extended their three‐factor model to include certain quality aspects with the ‘profitability’ factor of Novy‐Marx () and the ‘investment’ factor of Aharoni et al (). They argue that expected returns are not solely driven by the book to market ratio ( V ), but also by ‘profitability’ ( R ) and ‘investment’ ( C ).…”

Section: Datamentioning

confidence: 99%

The mixed vs the integrated approach to style investing: Much ado about nothing?

Leippold

Rueegg

2017

Euro Fin Management

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We study the difference between the returns to the integrated approach to style investing and those to the mixed approach. Unlike the mixed approach, the integrated approach aggregates factor characteristics at security level. Recent literature finds that the integrated approach dominates the mixed approach. Using statistical tools for robust performance testing, we demystify these findings as a statistical fluke. We do not find any evidence favouring the integrated approach. What we do find is that the integrated approach exhibits a higher sensitivity to the low-risk anomaly. However, this reduction in risk does not lead to an improvement in performance.

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Stock Returns and the Miller-Modigliani Valuation Formula: Revisiting the Fama-French Analysis

Cited by 40 publications

References 2 publications

The Investment CAPM

The Investment CAPM

A Long‐Run Performance Perspective on the Technology Bubble

The mixed vs the integrated approach to style investing: Much ado about nothing?

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