The change in a firm’s profitability, or profitability growth, has incremental power to predict stock returns over current profitability and other well-known cross-sectional determinants. From 1975 to 2014, the Fama and French five-factor alpha on a long-short strategy based on profitability growth is 1.14% per month. This strategy remains highly profitable after controlling for size, book-to-market ratio, profitability, or momentum. The effect is stronger among firms experiencing steady, as opposed to dramatic, changes in profitability growth. An augmented Fama and French three-factor model that includes a profitability-growth factor captures the momentum anomaly at least as well as other prominent factor models.
JEL classification: G11; G12
Keywords: Profitability; Growth; Return Predictability; Stock Returns
학회소식
[2016년 제 4차] The Value of Growth: Changes in Profitability and F
작성자 : 관리자
조회수 : 1008
게시일 :
2016-12-21
