The Expected Returns and Valuations of Private and Public Firms
50 Pages Posted: 10 Mar 2013 Last revised: 19 Mar 2013
There are 2 versions of this paper
The Cross-Section of Industry Investment Returns
Date Written: March 18, 2013
Abstract
Industry characteristics explain the cross section of investment returns among industries consisting primarily of private rms as well as among industries composed mostly of public rms. For both types of industries, common asset pricing models explain the cross-sectional variation of characteristic-based investment returns. Tobins q and its cross sectional variation are very similar across private and public rms. An industrys characteristics, not the fraction of private rms in it, determines the industrys cost of capital. Assuming that managers of private rms are less affected by investor misvaluation our results are consistent with a rational interpretation of the role of characteristics.
Keywords: Real Investment, Systematic Risk, Mispricing, q-theory, Investment Returns, Cost of Capital, Private Firms, Public Firms
JEL Classification: G0, G12, G31
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Optimal Investment, Growth Options, and Security Returns
By Jonathan Berk, Richard C. Green, ...
-
By Lu Zhang
-
A Cross-Sectional Test of a Production-Based Asset Pricing Model
-
Equilibrium Cross-Section of Returns
By Joao F. Gomes, Leonid Kogan, ...
-
Equilibrium Cross-Section of Returns
By Joao F. Gomes, Leonid Kogan, ...
-
Capital Investments and Stock Returns
By K.c. John Wei, Feixue Xie, ...
-
Capital Investments and Stock Returns
By K.c. John Wei, Feixue Xie, ...
-
Corporate Investment and Asset Price Dynamics: Implications for the Cross-Section of Returns
By Murray Carlson, Adlai J. Fisher, ...
-
By Eugene F. Fama and Kenneth R. French