Scale or Yield? A Present-Value Identity

• 成果类型: Article
• 署名作者: Cho, Thummim; Kremens, Lukas; Lee, Dongryeol; Polk, Christopher
• 署名单位: Korea University; University of Washington; University of Washington Seattle; University of London; London School Economics & Political Science
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhad068
• 发表日期: 2024
• 页码: 950
• 关键词: FIRM CHARACTERISTICS; share issuance; DELISTING BIAS; INVESTMENT; Dividends; GROWTH; profitability; propensity; duration; earnings

摘要

We propose a loglinear present-value identity in which investment (scale), profitability (yield), and discount rates determine a firm's market-to-book ratio. Our identity reconciles existing influential market-to-book decompositions and facilitates novel insights from three empirical applications: (1) Both investment and profitability are important contributors to the value spread and stock return news variance. (2) Any cross-sectional return predictability has a mirror image in cash-flow fundamentals, providing asset pricing theories with additional moments to match. (3) The investment spread significantly improves the predictability of time-series variation in the value premium and justifies the poor performance of value in recent years.Received January 30, 2022; editorial decision June 6, 2023 by Editor Itay Goldstein. Authors have furnished an , which is available on the Oxford University Press Web site next to the link to the final published paper online