RIM-based value premium and factor pricing using value-price divergence

文献类型： 外文期刊

第一作者： Cong, Lin William

作者： Cong, Lin William;Cong, Lin William;George, Nathan Darden;Wang, Guojun

作者机构： Cornell Univ, Samuel Curtis Johnson Grad Sch Management, Ithaca, NY USA;Natl Bur Econ Res NBER, Cambridge, MA USA;Univ Calif Berkeley, Haas Sch Business, Berkeley, CA USA;Shanghai Normal Univ, Sch Finance & Business, Shanghai, Peoples R China

关键词： Asset pricing; Factor models; Mispricing; RIM; Value Investing

期刊名称：JOURNAL OF BANKING & FINANCE （ 2022影响因子：3.7； 五年影响因子：4.6 ）

ISSN： 0378-4266

年卷期： 2023 年 149 卷

页码：

收录情况： SCI

摘要： We document that value-to-price, the ratio of Residual-Income-Model-based valuation to market price, subsumes the power of book-to-market ratio and many other value or quality measures in predicting stock returns. Long-short value-to-price portfolios hedge against momentum, revitalize the seemingly missing value premium over past decades, and generate significant returns after adjusting for common factors. The value-price-divergence (VPD) factor constructed from the average returns of these portfolios within small and big stocks is not spanned by these known factors. Max Sharpe ratio and constrained R-squared tests reveal that VPD is a better substitute for the traditional value factor and that a four-factor model using the VPD, market, momentum, and size factors outperforms most extant benchmarks in ex-plaining the cross-section of expected equity returns, including value-to-price portfolios as test assets. The findings remain robust under alternative specifications of equity cost of capital.(c) 2023 Elsevier B.V. All rights reserved.

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