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Testing the q-Theory of Anomalies

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Author Info
Toni M. Whited
Lu Zhang () (Simon School of Business University of Rochester)

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Abstract

The q-theory explanations of asset pricing anomalies are quantitatively important. We perform a new asset pricing test by using GMM to minimize the difference between average stock returns in the data and average investment returns constructed from observable firm characteristics. Under various specifications, the model-implied average returns display similar magnitudes of dispersion across portfolios sorted on investment-to-asset and on size and book-to-market. But the predicted dispersions in average returns among portfolios sorted on earnings surprises are somewhat smaller in magnitude than those observed in the data

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File URL: http://repec.org/sed2006/up.20259.1139891979.pdf
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Publisher Info
Paper provided by Society for Economic Dynamics in its series 2006 Meeting Papers with number 380.

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Date of creation: 03 Dec 2006
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Handle: RePEc:red:sed006:380

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Related research
Keywords: q-theory; asset pricing anomalies; structural estimation;

Find related papers by JEL classification:
G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Investment Policy

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This page was last updated on 2009-11-26.

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