| Summary: | This study develops a new return model with respect to
accounting fundamentals. The new return model is based on
Chen and Zhang (2007). This study takes into account the
investment scalability information. Specifically, this study splits
the scale of firm�s operations into short-run and long-run
investment scalabilities. We document that five accounting fundamentals
explain the variation of annual stock return. The
factors, comprised book value, earnings yield, short-run and
long-run investment scalabilities, and growth opportunities, coassociate
positively with stock price. The remaining factor,
which is the pure interest rate, is negatively related to annual
stock return. This study finds that inducing short-run and longrun
investment scalabilities into the model could improve the degree of association. In other words, they have value relevance.
Finally, this study suggests that basic trading strategies
will improve if investors revert to the accounting fundamentals
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