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Testing the q-Theory of Anomalies

Listed author(s):
  • Toni M. Whited
  • Lu Zhang

    ()

    (Simon School of Business University of Rochester)

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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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
Handle: RePEc:red:sed006:380
Contact details of provider: Postal:
Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA

Web page: http://www.EconomicDynamics.org/
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