Published in:Discussion Paper on Business and Economics, University of Southern Denmark, 2/2020
Extent:
1 Online-Ressource (41 p)
Language:
English
DOI:
10.2139/ssrn.3540903
Identifier:
Origination:
Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments February 19, 2020 erstellt
Description:
Value normalizes size by book equity, which is a (relatively bad) proxy for expected cash flows. X-value normalizes size by the recursive out-of-sample expectation of each firm's net income, based on its financials, with coefficients estimated by industry. Unlike value (but similarly constructed), the resulting X-value factor is unspanned by the Fama/French factors – market, size, value, investment, and profitability – individually or in different combinations (each factor and the market; all factors together; all except value). X-value spans the value and investment premiums with a Sharpe ratio of 0.57 (compared to 0.39 for value)