Growth Opportunities, Technology Shocks, and Asset Prices
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...
| Main Authors: | , |
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| Other Authors: | |
| Format: | Article |
| Language: | en_US |
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American Finance Association/Wiley
2015
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| Online Access: | http://hdl.handle.net/1721.1/98887 https://orcid.org/0000-0001-9387-9728 |
| _version_ | 1811079796517502976 |
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| author | Kogan, Leonid Papanikolaou, Dimitris |
| author2 | Sloan School of Management |
| author_facet | Sloan School of Management Kogan, Leonid Papanikolaou, Dimitris |
| author_sort | Kogan, Leonid |
| collection | MIT |
| description | 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. |
| first_indexed | 2024-09-23T11:20:35Z |
| format | Article |
| id | mit-1721.1/98887 |
| institution | Massachusetts Institute of Technology |
| language | en_US |
| last_indexed | 2024-09-23T11:20:35Z |
| publishDate | 2015 |
| publisher | American Finance Association/Wiley |
| record_format | dspace |
| spelling | mit-1721.1/988872022-09-27T18:50:28Z Growth Opportunities, Technology Shocks, and Asset Prices Kogan, Leonid Papanikolaou, Dimitris Sloan School of Management Kogan, Leonid 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. 2015-09-24T14:17:14Z 2015-09-24T14:17:14Z 2014-03 2013-08 Article http://purl.org/eprint/type/JournalArticle 00221082 1540-6261 http://hdl.handle.net/1721.1/98887 Kogan, Leonid, and Dimitris Papanikolaou. “Growth Opportunities, Technology Shocks, and Asset Prices.” The Journal of Finance 69, no. 2 (March 17, 2014): 675–718. https://orcid.org/0000-0001-9387-9728 en_US http://dx.doi.org/10.1111/jofi.12136 The Journal of Finance Creative Commons Attribution-Noncommercial-Share Alike http://creativecommons.org/licenses/by-nc-sa/4.0/ application/pdf American Finance Association/Wiley Other repository |
| spellingShingle | Kogan, Leonid Papanikolaou, Dimitris Growth Opportunities, Technology Shocks, and Asset Prices |
| title | Growth Opportunities, Technology Shocks, and Asset Prices |
| title_full | Growth Opportunities, Technology Shocks, and Asset Prices |
| title_fullStr | Growth Opportunities, Technology Shocks, and Asset Prices |
| title_full_unstemmed | Growth Opportunities, Technology Shocks, and Asset Prices |
| title_short | Growth Opportunities, Technology Shocks, and Asset Prices |
| title_sort | growth opportunities technology shocks and asset prices |
| url | http://hdl.handle.net/1721.1/98887 https://orcid.org/0000-0001-9387-9728 |
| work_keys_str_mv | AT koganleonid growthopportunitiestechnologyshocksandassetprices AT papanikolaoudimitris growthopportunitiestechnologyshocksandassetprices |