imprint:
Cambridge, Mass: National Bureau of Economic Research, December 1996
Published in:NBER working paper series ; no. w5860
Extent:
1 Online-Ressource
Language:
English
DOI:
10.3386/w5860
Identifier:
Reproduction note:
Hardcopy version available to institutional subscribers
Origination:
Footnote:
Mode of access: World Wide Web
System requirements: Adobe [Acrobat] Reader required for PDF files
Description:
This paper provides a global asset pricing perspective on the debate over the relation between predetermined attributes of common stocks, such as ratios of price-to-book-value, cash-flow, earnings, and other variables to the future returns. Some argue that such variables may be used to find securities that are systematically undervalued by the market, while others argue that the measures are proxies for exposure to underlying economic risk factors. It is not possible to distinguish between these views without explicitly modeling the relation between such attributes and risk factors. We present an empirical framework for attacking the problem at a global level, assuming integrated markets. Our perspective pulls together the traditional academic and practitioner viewpoints on lagged attributes. We present new evidence on the relative importance of risk and mispricing effects, using monthly data for 21 national equity markets. We find that the cross-sectional explanatory power of the lagged attributes is related to both risk and mispricing in the two-factor model than mispricing