Market Reactions to Tangible and Intangible Information
The book-to-market effect is often interpreted as evidence of high expected returns on stocks of "distressed" firms with poor past performance. We dispute this interpretation. We find that while a stock's future return is unrelated to the firm's past accounting-based performance, it is strongly negatively related to the "intangible" return, the component of its past return that is orthogonal to the firm's past performance. Indeed, the book-to-market ratio forecasts returns because it is a good proxy for the intangible return. Also, a composite equity issuance measure, which is related to intangible returns, independently forecasts returns. Copyright 2006 by The American Finance Association.
Year of publication: |
2006
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Authors: | DANIEL, KENT ; TITMAN, SHERIDAN |
Published in: |
Journal of Finance. - American Finance Association - AFA, ISSN 1540-6261. - Vol. 61.2006, 4, p. 1605-1643
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Publisher: |
American Finance Association - AFA |
Saved in:
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