Topic
Stock (geology)
About: Stock (geology) is a research topic. Over the lifetime, 31009 publications have been published within this topic receiving 783542 citations.
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TL;DR: In this paper, the authors predict that more profitable firms have higher expected returns, as do firms with higher book-to-market equity ratio (Bt/Mt), expected profitability, and expected investment.
877 citations
TL;DR: In this article, the authors developed a stock market model with differences of opinion and short-sales constraints and found that stocks whose change in breadth in the prior quarter is in the lowest decile of the sample underperform those in the top decile by 6.38% in the twelve months after formation.
874 citations
TL;DR: In this paper, the authors take a new look at the predictability of stock market returns with risk measures and find a signi cant positive relation between average stock variance (largely idiosyncratic) and the return on the market.
Abstract: This paper takes a new look at the predictability of stock market returns with risk measures. We ¢nd a signi¢cant positive relation between average stock variance (largely idiosyncratic) and the return on the market. In contrast, the variance of the market has no forecasting power for the market return. These relations persist after we control for macroeconomic variables known to forecast the stock market. The evidence is consistent with models of timevarying risk premia based on background risk and investor heterogeneity. Alternatively, our ¢ndings can be justi¢ed by the option value of equity in the capital structure of the ¢rms. MOSTASSET PRICING MODELS, starting with Merton’s (1973) ICAPM, suggest a positive relation between risk and return for the aggregate stock market. There is a long empirical literature that has tried to establish the existence of such a tradeoi between risk and return for stock market indices. 1 Unfortunately, the results have been inconclusive. Often the relation between risk and return has been found insigni¢cant, and sometimes even negative. The innovation in this paper is to look at average stock risk in addition to market risk.We measure average stock risk in each month similarly to Campbell et al. (2001; hereafter CLMX), as the cross-sectional average of the variances of all the stocks traded in that month.We then run predictive regressions of market returns on this variance measure as well as the variance of the market. Consistent with some previous studies, we ¢nd that market variance has no forecasting power for the market return. However, we do ¢nd a signi¢cant positive relation between average stock variance and the return on the market.
861 citations
TL;DR: In this article, the authors examined the relation between the interest rate sensitivity of common stock returns and the maturity composition of the firm's nominal contracts and found that the co-movement of stock return and interest rate changes is positively related to the size of the maturity difference between the nominal assets and liabilities.
Abstract: This paper examines the relation between the interest rate sensitivity of common stock returns and the maturity composition of the firm's nominal contracts. Using a sample of actively traded commerical banks and stock savings and loan associations, common stock returns are found to be correlated with interest rate changes. The co-movement of stock returns and interest rate changes is positively related to the size of the maturity difference between the firm's nominal assets and liabilities.
859 citations
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.
Abstract: We test whether the impact of financial constraints on firm value is observable in asset returns. We form portfolios of firms based on observable characteristics related to financial constraints, and test for common variation in the stock returns of these firms. Financially constrained firms? stock returns move together over time. Constrained firms have low returns in our sample of growing manufacturing firms in 1968-1997. We find little evidence that the relative performance of financially constrained firms reflects monetary policy, credit conditions, or business cycles.
858 citations