EconPapers    
Economics at your fingertips  
 

Are the Fama French factors treated as risk? Evidence from CEO compensation

Jeremy Bertomeu, Edwige Cheynel and Michelle Liu‐Watts

European Financial Management, 2018, vol. 24, issue 5, 728-774

Abstract: Asset pricing theory postulates that a risk factor correlates with individuals' marginal utility of consumption. Hence, under plausible preferences, individuals should become more risk tolerant given favorable factor returns. We show that this wealth effect predicts a positive association between performance pay and factor returns. Our results support the hypothesized relationship for the market, book‐to‐market and momentum factors. Factors constructed from bond prices are positively associated to incentives, incrementally to the Fama French factors, but we obtain mixed evidence for higher‐order market factors, liquidity factors or factors constructed from national income accounts, including pricing kernels.

Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://doi.org/10.1111/eufm.12172

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:eufman:v:24:y:2018:i:5:p:728-774

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=1354-7798

Access Statistics for this article

European Financial Management is currently edited by John Doukas

More articles in European Financial Management from European Financial Management Association Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().

 
Page updated 2019-02-23
Handle: RePEc:bla:eufman:v:24:y:2018:i:5:p:728-774