A Unified Duration-Based Explanation of the Value, Profitability, and Investment Anomalies

Research output: Conference Papers (RGC: 31A, 31B, 32, 33)32_Refereed conference paper (no ISBN/ISSN)peer-review

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Detail(s)

Original languageEnglish
Publication statusPublished - Dec 2018

Conference

Title31st Australasian Finance and Banking Conference, AFBC 2018
LocationShangri-La Hotel
PlaceAustralia
CitySydney
Period13 - 15 December 2018

Abstract

We use the cash flow duration to unify the value, profitability and investment premiums in a risk-based framework: short duration firm associates with the high book-to-market ratio, high profitability, and low investment, hence high return while long duration firm has a low book-to-market ratio, low profitability, and high investment, hence lower return. Duration predicts stock return significantly in the cross-section and can subsume the value, profitability, and investment premiums. A duration-based factor model with factors that capture returns associated with duration and duration transition shows strong ability in explaining the value, profitability, and investment-related factors and many other related anomalies.

Citation Format(s)

A Unified Duration-Based Explanation of the Value, Profitability, and Investment Anomalies. / Chen, Shan; Li, Tao.

2018. Paper presented at 31st Australasian Finance and Banking Conference, AFBC 2018, Sydney, Australia.

Research output: Conference Papers (RGC: 31A, 31B, 32, 33)32_Refereed conference paper (no ISBN/ISSN)peer-review