The Investment CAPM

72 Pages Posted: 19 Mar 2017 Last revised: 27 Mar 2017

See all articles by Lu Zhang, 张橹

Lu Zhang, 张橹

Ohio State University - Fisher College of Business; National Bureau of Economic Research (NBER)

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Date Written: March 2017

Abstract

A new class of Capital Asset Pricing Models (CAPM) arises from the first principle of real investment for individual firms. Conceptually as "causal"' as the consumption CAPM, yet empirically more tractable, the investment CAPM emerges as a leading asset pricing paradigm. Firms do a good job in aligning investment policies with costs of capital, and this alignment drives many empirical patterns that are anomalous in the consumption CAPM. Most important, integrating the anomalies literature in finance and accounting with neoclassical economics, the investment CAPM succeeds in mounting an efficient markets counterrevolution to behavioral finance in the past 15 years.

Suggested Citation

Zhang, Lu, The Investment CAPM (March 2017). NBER Working Paper No. w23226. Available at SSRN: https://ssrn.com/abstract=2935431

Lu Zhang (Contact Author)

Ohio State University - Fisher College of Business ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States
585-267-6250 (Phone)

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

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