The Q-Theoretical Link between Stock and Investment Returns

28 Pages Posted: 18 Mar 2005

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)

Date Written: March 2005

Abstract

Investment-based asset pricing uses the link between stock and investment returns to tie expected returns with firm characteristics. I derive the equivalence between these two returns in the Q-framework with variable capacity utilization, proportional operating costs, irreversible investment, and dividend constraints. With multiple capital goods, stock return is the value-weighted average of individual investment returns. Under time-to-build, I derive the relation between the market value and the marginal q, but no analytical link is available between stock and investment returns.

Keywords: Investment-based asset pricing, capacity utilization, investment return, capital heterogeneity, time-to-build

JEL Classification: E22, G12, G31

Suggested Citation

Zhang, Lu, The Q-Theoretical Link between Stock and Investment Returns (March 2005). Available at SSRN: https://ssrn.com/abstract=683342 or http://dx.doi.org/10.2139/ssrn.683342

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)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
221
Abstract Views
1,171
rank
137,190
PlumX Metrics