Returns Premia on Company Fundamentals

34 Pages Posted: 27 Feb 2011

See all articles by Kateryna Shapovalova

Kateryna Shapovalova

Université Paris I Panthéon-Sorbonne; Paris School of Economics (PSE)

Alexander Subbotin

Renaissance Finance

Thierry Chauveau

National Center for Scientific Research (CNRS)

Date Written: February 26, 2011


This paper studies the excess returns on stocks, associated to various company fundamentals on a panel of US stocks from 1979 to 2008. The returns premia are measured using a random coefficient panel data model on the individual stock level. We show that the HML and SMB factors in the Fama and French model probably have no particular economic meaning as sources of systematic risk other than being proxies for the impact of the book-to-price and size characteristics. While the book-to-price ratio, market capitalization, past year sales growth and the share of reinvested profits generate significant premia, earnings history and forecasts are of little predictive power. We statistically confirm the time-varying nature of the style premia but find no strong evidence for the value and growth momentum in a multivariate setting when the systematic risk is controlled for. Some of the premia are positively correlated with the market return and between each other, while others seem to be unrelated. Variations in premia associated with companies' high internal growth and growth of sales are positively correlated between each other, with the market return and with the value premium. Variations of the size premium are probably driven by different factors.

Keywords: Stock Returns, Company Fundamentals, Asset Pricing, Three-Factor Model, Style Momentum

JEL Classification: G10, G14

Suggested Citation

Shapovalova, Kateryna and Subbotin, Alexander and Chauveau, Thierry, Returns Premia on Company Fundamentals (February 26, 2011). Available at SSRN: or

Kateryna Shapovalova (Contact Author)

Université Paris I Panthéon-Sorbonne ( email )

17, rue de la Sorbonne
Paris, IL 75005

Paris School of Economics (PSE) ( email )

48 Boulevard Jourdan
Paris, 75014 75014

Alexander Subbotin

Renaissance Finance ( email )

9, chemin Pierre de Ronsard
Courbevoie, 92400

Thierry Chauveau

National Center for Scientific Research (CNRS) ( email )

3, rue Michel-Ange
Paris cedex 16, 75794
33 1 44 07 82 68 (Phone)
33 1 44 07 82 70 (Fax)

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