Firm life expectancy and the heterogeneity of the book-to-market effect

• 成果类型: Article
• 署名作者: Chen, Huafeng (Jason)
• 署名单位: University of British Columbia
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2010.12.007
• 发表日期: 2011
• 页码: 402-423
• 关键词: Book-to-market effect; Firm life expectancy; Delisting; Equity duration

摘要

I argue that the reason the book-to-market effect is stronger in small stocks is because smaller stocks generally have shorter life expectancy and therefore shorter equity duration. I build a model in which the book-to-market effect is stronger in stocks with shorter life expectancy. Empirically, I use delisting probability as my proxy for life expectancy. The data support my model's central prediction and its additional implications for stock return and variance. My results provide a rational explanation for the heterogeneity of the book-to-market effect, evidence previously taken as support for behavioral explanations. (C) 2010 Elsevier B.V. All rights reserved.