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Michael Brennan, Yihong Xia, Michael Brennan
The Rodney L. White Center for Financial Research Risk and Valuation Under an Intertemporal Capital Asset Pricing Model
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Overconfidence, Arbitrage, and Equilibrium Asset PricingJournal of Finance, 56
J. Campbell, J. Mei (1993)
Where Do Betas Come from? Asset Price Dynamics and the Sources of Systematic RiskNBER Working Paper Series
K. Daniel, D. Hirshleifer, A. Subrahmanyam (1998)
Investor Psychology and Security Market Under-and Over-reactionsJournal of Finance, 3
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Ronald Lanstein, W. Sharpe (2009)
OF FINANCIAL AND QUANTITATIVE ANALYSIS Proceedings Issue-November 1978 DURATION AND SECURITY RISK
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Duration is an important and well-established risk characteristic for fixed income securities. We use recent developments in financial statement analysis research to construct a measure of duration for equity securities. We find that the standard empirical predictions and results for fixed income securities extend to equity securities. We show that stock price volatility and stock beta are both positively correlated with equity duration. Moreover, estimates of common shocks to expected equity returns extracted using our measure of equity duration capture a strong common factor in stock returns. Additional analysis shows that the book-to-market ratio provides a crude measure of equity duration and that our more refined measure of equity duration subsumes the Fama and French (1993) book-to-market factor in stock returns. Our research shows how structured financial statement analysis can be used to construct superior measures of equity security risk.
Review of Accounting Studies – Springer Journals
Published: Sep 30, 2004
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