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Asset tangibility, industry representation and the cross section of equity returns


Author Info

  • Paul Docherty
  • Howard Chan

    (Department of Finance, The University of Melbourne, Australia)

  • Steve Easton

    (Newcastle Business School, The University of Newcastle, Australia)

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    Recent theory relates expected returns and covariant risk to the investment decisions of a firm across certain stages of the business cycle. Using the Australian accounting environment that provides a wider scope for the capitalisation of intangible assets compared with the United States, this paper tests the relationship between asset tangibility and returns within the Fama and MacBeth (1973) framework. A relationship is found to exist between asset tangibility and the cross-section of equity returns. This relationship is most evident in the materials industry, which is characterised by irreversible, firm-specific assets. These results persist after controlling for firm characteristics that Fama and French (1992) show are related to returns, although the effect is largely driven by microcap stocks.

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    Bibliographic Info

    Article provided by Australian School of Business in its journal Australian Journal of Management.

    Volume (Year): 36 (2011)
    Issue (Month): 1 (April)
    Pages: 75-87

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    Handle: RePEc:sae:ausman:v:36:y:2011:i:1:p:75-87

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    Related research

    Keywords: asset pricing; cross-section; industry; tangibility of assets;


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