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Operating Hedge and Gross Profitability Premium
We show theoretically that variable production costs reduce systematic risk of firms' cash flows if capital and variable inputs are complementary in firms' production and input prices are procyclical. In our dynamic model, this operating hedge effect is weaker for more profitable firms, giving rise to a gross profitability premium. Moreover, gross profitability and value factors are distinct and negatively correlated, and their premia are not captured by the capital asset pricing model (CAPM). We estimate the model by simulated method of moments, and find that its main implications for stock returns and cash flow dynamics are quantitatively consistent with the data.
Ketersediaan
| Call Number | Location | Available |
|---|---|---|
| PSB lt.dasar - Pascasarjana (Koleksi Majalah) | 1 |
| Penerbit | USA: The American Finance Association 2023 |
|---|---|
| Edisi | Volume 78, Issue 6, December 2023, Pages 3387-3422 |
| Subjek | Stock Returns Capital Asset Pricing Model (CAPM) Fundamental Risk |
| ISBN/ISSN | 1540-6261 |
| Klasifikasi | NONE |
| Deskripsi Fisik | First Published : 13 September 2023 |
| Info Detail Spesifik | The Journal of Finance |
| Other Version/Related | Tidak tersedia versi lain |
| Lampiran Berkas |