2005/01/08 by Lu Zhang, LU ZHANG · 1,443 citations
Economics, Econometrics and Finance · #Capital asset pricing model #Computer science #Econometrics #Economics #Financial Markets and Investment Strategies #Financial economics #Market Dynamics and Volatility #Microeconomics #Monetary Policy and Economic Impact #Rational expectations #Risk premium #Value (mathematics) #Value premium
paper · doi:10.1111/j.1540-6261.2005.00725.x
published in The Journal of Finance 60(1), 67-103 (Wiley)
openalex publication_date 2005/01/08 · openalex created_date 2021/02/01 · openalex updated_date 2026/07/27
ABSTRACT The value anomaly arises naturally in the neoclassical framework with rational expectations. Costly reversibility and countercyclical price of risk cause assets in place to be harder to reduce, and hence are riskier than growth options especially in bad times when the price of risk is high. By linking risk and expected returns to economic primitives, such as tastes and technology, my model generates many empirical regularities in the cross‐section of returns; it also yields an array of new refutable hypotheses providing fresh directions for future empirical research.