Corporate Equity Performance and Changes in Firm Characteristics

28 Pages Posted: 30 Jun 2021

See all articles by Brian Blank

Brian Blank

Mississippi State University

Cole McLemore

Waterfall Asset Management

Date Written: August 14, 2020


While prior equity performance research analyzes portfolio characteristics using multifactor models, portfolio groups are typically used to explain average returns. Instead, we explore annual firm-level data and compare this with annual percentage changes in firm characteristics, emphasizing model predictive power and individual variation. Our analyses show a significant link between individual firm equity returns and percentage changes in total assets, book-to-market ratios, current ratios and shares outstanding, as well as historical returns and average market returns. Our findings affirm prior work illustrating the importance of profitability, size, liquidity, momentum and market returns, although we observe minimal evidence of the importance of investment in capital expenditures. We also perform these analyses at the industry level and note differences across industries, including the cyclical nature of the business equipment and consumer durables industries in contrast to the utilities and energy sectors. Overall, we contribute to the understanding of corporate characteristics and equity performance.

Keywords: corporate stock returns; firm profitability; investment decisions; cyclical industry.

Suggested Citation

Blank II, Douglas Brian and McLemore, Cole, Corporate Equity Performance and Changes in Firm Characteristics (August 14, 2020). Journal of Investment Strategies, Vol. 10, No. 1, Available at SSRN:

Douglas Brian Blank II (Contact Author)

Mississippi State University ( email )

Mississippi State, MS 39762
United States
(662) 325-5910 (Phone)

Cole McLemore

Waterfall Asset Management ( email )

1251 Avenue of the Americas Fl 50
NY 10020
United States

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