Growth Opportunities, Technology Shocks, and Asset Prices
By Leonid Kogan, Dimitris Papanikolaou. 2014
281 citations recorded by the source corpus.
type="main"> We explore the impact of investment-specific technology (IST) shocks on the cross section of stock returns. Using a structural model, we show that IST shocks have a differential effect on the value of assets in place and the value of growth opportunities. This differential sensitivity to IST shocks has two main implications. First, firm risk premia depend on the contribution of growth opportunities to firm value. Second, firms with similar levels of growth opportunities comove with each other, giving rise to the value factor in stock returns and the failure of the conditional CAPM. Our empirical tests confirm the model's predictions.
Subfields: Accounting, Finance
View Paper: https://www.semanticscholar.org/paper/f5a86db6821b373ea667cee4a9b2411503e623b2
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Citations in the corpus
- Technological links and predictable returns (2019, unknown): “25 Greenwood, Hercowitz, and Krusell (1997) suggest that investment-specific technological change explain aggregate economic growth; later works such as Kogan and Papanikolaou (2014), and Papanikolaou (2011) propose investment-specific technological change as a systematic risk priced in stock market”
- Who Are the Value and Growth Investors (2017, unknown): “The development of overlapping generations models matching these features in the style of Garleanu, Kogan, and Panageas (2012) and Kogan and Papanikolaou (2014) are natural extensions of our work.”
- Media Coverage and the Cost of Debt (2019, unknown): “Following Kogan and Papanikolaou (2014), we use the market-to-book (MTB) ratio at the end of the year prior to the bond offering as a proxy for the firm’s future growth opportunities.”
- A Theory of Firm Characteristics and Stock Returns: The Role of Investment-Specific Shocks (2012, unknown): “We extend the analysis in Kogan and Papanikolaou (2011) to allow for learning about firms’ growth opportunities, and provide evidence that differential exposure to IST shocks accounts for a number of other stylized empirical patterns in addition to the value premium.”
- Firm-Level Productivity, Risk, and Return (2014, unknown): “41Examining cross sectional implications of differences in exposure to technological innovations as in Garleanu, Panageas, and Yu (2012), or implications of investment specific technological change by introducing vintage capital as in Kogan and Papanikolaou (2011) are left for future research.”
- Growth, Slowdowns, and Recoveries (2019, unknown): “As the stationary TFP shocks drive most of the short run dynamics in real marginal costs, these shocks consequently explain most of the business cycle variation in inflation (around 70%). The fact that the stationary technology shock explains the bulk of inflation business cycle fluctuations and at ”
- The Cross-Section and Time-Series of Stock and Bond Returns (2017, unknown): “…linking the cross-section of stock returns to firm characteristics in the production-based asset pricing literature are Berk, Green, and Naik (1999), Gomes, Kogan, and Zhang (2003), Papanikolaou (2007), Liu, Whited, and Zhang (2009), Kogan and Papanikolaou (2014), and Hou, Xue, and Zhang (2015).”
- Toward a Quantitative General Equilibrium Asset Pricing Model with Intangible Capital (2013, background): “More recently, Kogan and Papanikolaou (2009) and Kogan and Papanikolaou (2010) provide direct empirical evidence on the lower average return of growth options relative to assets in place.”