Growth Opportunities, Technology Shocks, and Asset Prices
Name
Kogan_Growth opportunities.pdf
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456.63 KB
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Adobe PDF
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ecfaa97755a8de4ff8e216c27d494a00
Author(s)
Kogan, Leonid
Papanikolaou, Dimitris
Date Issued
March 2014
Journal
The Journal of Finance
Publisher
American Finance Association/Wiley
Citation
Kogan, Leonid, and Dimitris Papanikolaou. “Growth Opportunities, Technology Shocks, and Asset Prices.” The Journal of Finance 69, no. 2 (March 17, 2014): 675–718.
Version
Original manuscript
Abstract
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.
MIT Department
Sloan School of Management
Terms of Use
Creative Commons Attribution-Noncommercial-Share Alike
Persistent DSpace Link
DOI of Published Version
https://doi.org/10.1111/jofi.12136
