An accounting-based asset pricing model and a fundamental factor

• 成果类型: Article
• 署名作者: Penman, Stephen; Zhu, Julie
• 署名单位: Columbia University; Bocconi University; Fudan University
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101
• DOI: 10.1016/j.jacceco.2021.101476
• 发表日期: 2022
• 关键词: cross-section; stock returns; INVESTMENT; consumption; valuation; earnings; RISK; substitution; INFORMATION; GROWTH

摘要

This paper recasts the consumption asset pricing model in terms of accounting numbers that connect to consumption and the risk to consumption under accounting principles. The modeling yields an expected return measure that forecasts realized returns and the risk to those returns. It leads to the construction of a pricing factor from the accounting infor-mation. The factor performs well relative to extant factors in explaining cross-sectional returns. The factor return has negative correlation with the market portfolio and ex-hibits the property of protecting payoffs in bad states when consumption is low. This then prompts a two-factor representation that combines the market portfolio with a hedge portfolio against loss to consumption. (c) 2022 Elsevier B.V. All rights reserved.