TY  - JOUR
AU  - Liu,Laura X. L.
AU  - Whited,Toni
AU  - Zhang,Lu
TI  - Regularities
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 13024
PY  - 2007
Y2  - April 2007
UR  - http://www.nber.org/papers/w13024
L1  - http://www.nber.org/papers/w13024.pdf
N1  - Author contact info:
Laura X. L. Liu
Finance Department
School of Business and Management
Hong Kong University of Science and Technology
Kowloon, Hong Kong
E-Mail: fnliu@ust.hk

Toni Whited
Simon School of Business
University of Rochester
Rochester, NY 14627
Tel: 585/275-3916
E-Mail: toni.whited@simon.rochester.edu

Lu Zhang
Fisher College of Business
The Ohio State University
2100 Neil Avenue
Columbus, OH 43210
Tel: 585-267-6250
E-Mail: zhanglu@fisher.osu.edu
AB  - The neoclassical q-theory is a good start to understand the cross section of returns. Under constant return to scale, stock returns equal levered investment returns that are tied directly with characteristics. This equation generates the relations of average returns with book-to-market, investment, and earnings surprises. We estimate the model by minimizing the differences between average stock returns and average levered investment returns via GMM. Our model captures well the average returns of portfolios sorted on capital investment and on size and book-to-market, including the small-stock value premium. Our model is also partially successful in capturing the post-earnings-announcement drift and its higher magnitude in small firms.
ER  -