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Anomalies

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  • Lu Zhang
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Abstract

I construct a neoclassical, Q-theoretical foundation for time-varying expected returns in connection with corporate policies and events. Under certain conditions, stock return equals investment return, which is directly tied with firm characteristics. This single equation is shown analytically to be qualitatively consistent with many anomalies, including the relations of future stock returns with market-to-book, investment and disinvestment rates, seasoned equity offerings, tender offers and stock repurchases, dividend omissions and initiations, expected profitability, profitability, and more important, earnings announcement. The Q-framework also provides a new asset pricing test.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11322.

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Date of creation: May 2005
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Publication status: published as Erica X. N. Li & Dmitry Livdan & Lu Zhang, 2009. "Anomalies," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 22(11), pages 4301-4334, November.
Handle: RePEc:nbr:nberwo:11322

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