Growth to value: Option exercise and the cross section of equity returns

• 成果类型: Article
• 署名作者: Ai, Hengjie; Kiku, Dana
• 署名单位: University of Minnesota System; University of Minnesota Twin Cities; University of Pennsylvania
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2012.08.009
• 发表日期: 2013
• 页码: 325-349
• 关键词: Value premium; Real options; general equilibrium; LONG-RUN RISKS; firm dynamics

摘要

We propose a general equilibrium model to study the link between the cross section of expected returns and book-to-market characteristics. We model two primitive assets: value assets and growth assets that are options on assets in place. The cost of option exercise, which is endogenously determined in equilibrium, is highly procyclical and acts as a hedge against risks in assets in place. Consequently, growth options are less risky than value assets, and the model features a value premium. Our model incorporates long-run risks in aggregate consumption and replicates the empirical failure of the conditional capital asset pricing model (CAPM) prediction. The model also quantitatively accounts for the pattern in mean returns on book-to-market sorted portfolios, the magnitude of the CAPM-alphas, and other stylized features of the cross-sectional data. (c) 2012 Elsevier B.V. All rights reserved.