Working Paper: NBER ID: w9743
Authors: Kent Daniel; Sheridan Titman
Abstract: We decompose stock returns into components attributable to tangible and intangible information. A firm's tangible return is the component of its return attributable to fundamental accounting-performance information, and its intangible return is the component which is orthogonal to this information. Our evidence indicates that intangible information reliably predicts future stock returns. However, in contrast to previous research, we find that tangible returns have no forecasting power. The premia associated with intangible information pose challenges for both traditional asset pricing models and models based on psychological factors.
Keywords: No keywords provided
JEL Codes: G1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| intangible information (D83) | future stock returns (G17) |
| tangible returns (G12) | future stock returns (G17) |
| share issuance (G24) | future stock returns (G17) |
| intangible returns (I26) | future performance expectations (D84) |
| intangible component of returns (G12) | return reversals (F31) |