Journal ArticleDOI
Industry costs of equity
Eugene F. Fama,Kenneth R. French +1 more
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TLDR
In this paper, the authors show that standard errors of more than 3.0% per year are typical for both the CAPM and the three-factor model of Fama and French (1993), and these large standard errors are the result of uncertainty about true factor risk premiums and imprecise estimates of the loadings of industries on the risk factors.About:
This article is published in Journal of Financial Economics.The article was published on 1997-02-01. It has received 6064 citations till now. The article focuses on the topics: Equity risk & Residual income valuation.read more
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Journal ArticleDOI
Financial Constraints and Stock Returns
TL;DR: In this article, the authors test whether the impact of financial constraints on firm value is observable in asset returns and find little evidence that the relative performance of financially constrained firms reflects monetary policy, credit conditions, or business cycles.
Journal ArticleDOI
Book-to-Market Equity, Distress Risk, and Stock Returns
TL;DR: The authors examined the relationship between book-to-market equity, distress risk, and stock returns among firms with the highest distress risk as proxied by Ohlson's ~1980! O-score, finding that the difference in returns between high and low book-tomarket securities is more than twice as large as that in other firms.
Journal ArticleDOI
Industry Concentration and Average Stock Returns
Kewei Hou,David Robinson +1 more
TL;DR: In this article, the authors posit that barriers to entry in highly concentrated industries insulate firms from undiversifiable distress risk, and firms in less concentrated industries are less risky because they engage in less innovation, and thereby command lower expected returns.
Journal ArticleDOI
Lending Relationships and Loan Contract Terms
TL;DR: This article found that repeated borrowing from the same lender affects loan contract terms and that such borrowing translates into a 10 to 17 bps lowering of loan spreads, and that the relationship borrowers obtain larger loans compared to non-relationship borrowers.
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Quantifying Managerial Ability: A New Measure and Validity Tests
TL;DR: A measure of managerial ability, based on managers' efficiency in generating revenues, which is available for a large sample of firms and outperforms existing ability measures is proposed, and it is found that the negative relation between equity financing and future abnormal returns documented in prior research is mitigated by managerial ability.
References
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Journal ArticleDOI
Common risk factors in the returns on stocks and bonds
Eugene F. Fama,Kenneth R. French +1 more
TL;DR: In this article, the authors identify five common risk factors in the returns on stocks and bonds, including three stock-market factors: an overall market factor and factors related to firm size and book-to-market equity.
Journal ArticleDOI
Capital asset prices: a theory of market equilibrium under conditions of risk*
TL;DR: In this paper, the authors present a body of positive microeconomic theory dealing with conditions of risk, which can be used to predict the behavior of capital marcets under certain conditions.
Journal ArticleDOI
The Cross‐Section of Expected Stock Returns
Eugene F. Fama,Kenneth R. French +1 more
TL;DR: In this paper, Bhandari et al. found that the relationship between market/3 and average return is flat, even when 3 is the only explanatory variable, and when the tests allow for variation in 3 that is unrelated to size.
Book ChapterDOI
The valuation of risk assets and the selection of risky investments in stock portfolios and capital budgets
TL;DR: In this article, the problem of selecting optimal security portfolios by risk-averse investors who have the alternative of investing in risk-free securities with a positive return or borrowing at the same rate of interest and who can sell short if they wish is discussed.
Journal ArticleDOI
The arbitrage theory of capital asset pricing
TL;DR: Ebsco as mentioned in this paper examines the arbitrage model of capital asset pricing as an alternative to the mean variance pricing model introduced by Sharpe, Lintner and Treynor.