A Dynamic Model of Characteristic-Based Return Predictability /
Alti, Aydoğan.
A Dynamic Model of Characteristic-Based Return Predictability / Aydoğan Alti, Sheridan Titman. - Cambridge, Mass. National Bureau of Economic Research 2019. - 1 online resource: illustrations (black and white); - NBER working paper series no. w25777 . - Working Paper Series (National Bureau of Economic Research) no. w25777. .
April 2019.
We present a dynamic model that links characteristic-based return predictability to systematic factors that determine the evolution of firm fundamentals. In the model, an economy-wide disruption process reallocates profits from existing businesses to new projects and thus generates a source of systematic risk for portfolios of firms sorted on value, profitability, and asset growth. If investors are overconfident about their ability to evaluate the disruption climate, these characteristic-sorted portfolios exhibit persistent mispricing. The model generates predictions about the conditional predictability of characteristic-sorted portfolio returns and illustrates how return persistence increases the likelihood of observing characteristic-based anomalies.
System requirements: Adobe [Acrobat] Reader required for PDF files.
Mode of access: World Wide Web.
A Dynamic Model of Characteristic-Based Return Predictability / Aydoğan Alti, Sheridan Titman. - Cambridge, Mass. National Bureau of Economic Research 2019. - 1 online resource: illustrations (black and white); - NBER working paper series no. w25777 . - Working Paper Series (National Bureau of Economic Research) no. w25777. .
April 2019.
We present a dynamic model that links characteristic-based return predictability to systematic factors that determine the evolution of firm fundamentals. In the model, an economy-wide disruption process reallocates profits from existing businesses to new projects and thus generates a source of systematic risk for portfolios of firms sorted on value, profitability, and asset growth. If investors are overconfident about their ability to evaluate the disruption climate, these characteristic-sorted portfolios exhibit persistent mispricing. The model generates predictions about the conditional predictability of characteristic-sorted portfolio returns and illustrates how return persistence increases the likelihood of observing characteristic-based anomalies.
System requirements: Adobe [Acrobat] Reader required for PDF files.
Mode of access: World Wide Web.