An empirical analysis of the investment and profitabilityeffects

摘要

Asset pricing factors formed on the level of firm investment and profitability are shown to have significant ex post explanatory power in the cross-section of stock returns. Whilst asset pricing models incorporating these fac- tors exhibit improved explanatory power in the cross-section of returns, conjecture exists as to the underlying drivers of the invest- ment and profitability effects. This thesis contains three empirical asset pricing studies examining the investment and profitability effects, providing tests of the efficacy of these factors. The results presented consider the pervasiveness of these factors across global equity markets, as well as examining two key theoretical explanations for these anomalies: shocks to the discount rate, and state vari- ables containing information on the future investment opportunity set.