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Anomalies

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  • Lu Zhang

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.

Suggested Citation

  • Lu Zhang, 2005. "Anomalies," NBER Working Papers 11322, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:11322
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    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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