2013/11/29 by LEONID KOGAN, Leonid Kogan, DIMITRIS PAPANIKOLAOU +1 · 322 citations
Business, Management and Accounting · Economics, Econometrics and Finance · #Capital Investment and Risk Analysis #Capital asset pricing model #Corporate Finance and Governance #Differential (mechanical device) #Econometrics #Economics #Financial Markets and Investment Strategies #Financial economics #Growth stock #Investment (military) #Monetary economics #Restricted stock #Risk premium #Stock (firearms) #Stock market #Value (mathematics) #Value premium
paper · pdf · doi:10.1111/jofi.12136
published in The Journal of Finance 69(2), 675-718 (Wiley)
openalex publication_date 2013/11/29 · openalex created_date 2025/10/10 · openalex updated_date 2026/08/04
ABSTRACT We explore the impact of investment‐specific technology (IST) shocks on the cross section of stock returns. Using a structural model, we show that IST shocks have a differential effect on the value of assets in place and the value of growth opportunities. This differential sensitivity to IST shocks has two main implications. First, firm risk premia depend on the contribution of growth opportunities to firm value. Second, firms with similar levels of growth opportunities comove with each other, giving rise to the value factor in stock returns and the failure of the conditional CAPM. Our empirical tests confirm the model's predictions.