Abstract

http://ssrn.com/abstract=2139735
 
 

References (33)



 


 



Idiosyncratic Cash Flows and Systematic Risk


Ilona Babenko


Arizona State University

Oliver Boguth


Arizona State University (ASU) - Finance Department

Yuri Tserlukevich


Arizona State University (ASU)

August 12, 2014

Western Finance Association 2013
Forthcoming in the Journal of Finance

Abstract:     
We show that unpriced cash flow shocks contain information about future priced risk. A positive idiosyncratic shock decreases the sensitivity of firm value to priced risk factors and simultaneously increases firm size and idiosyncratic risk. A simple model can therefore explain book-to-market and size anomalies, as well as the negative relation between idiosyncratic volatility and stock returns. Using the model, we identify firms for which anomalies must be stronger and confirm this relation empirically. More generally, our results imply that any economic variable correlated with the history of idiosyncratic shocks can help to explain expected stock returns.

Number of Pages in PDF File: 52


Open PDF in Browser Download This Paper

Date posted: September 2, 2012 ; Last revised: April 23, 2015

Suggested Citation

Babenko, Ilona and Boguth, Oliver and Tserlukevich, Yuri, Idiosyncratic Cash Flows and Systematic Risk (August 12, 2014). Western Finance Association 2013; Forthcoming in the Journal of Finance. Available at SSRN: http://ssrn.com/abstract=2139735 or http://dx.doi.org/10.2139/ssrn.2139735

Contact Information

Ilona Babenko
Arizona State University ( email )
Farmer Building 440G PO Box 872011
Tempe, AZ 85287
United States
Oliver Boguth
Arizona State University (ASU) - Finance Department ( email )
W. P. Carey School of Business
PO Box 873906
Tempe, AZ 85287-3906
United States
Yuri Tserlukevich (Contact Author)
Arizona State University (ASU) ( email )
Farmer Building 440G PO Box 872011
Tempe, AZ 85287
United States
Feedback to SSRN


Paper statistics
Abstract Views: 1,035
Downloads: 290
Download Rank: 65,525
References:  33
People who downloaded this paper also downloaded:
1. Tangibility and Investment Irreversibility in Asset Pricing
By Paul Docherty, H. Chan, ...

© 2015 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo7 in 0.329 seconds