Book-to-market effect and product life cycle

Ming-Che Hu (), Alex Huang (), Yanzhi Wang () and Dan-Liou Yu ()
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Ming-Che Hu: Chung Yuan Christian University
Yanzhi Wang: National Taiwan University
Dan-Liou Yu: National Yang Ming Chiao Tung University

Review of Quantitative Finance and Accounting, 2024, vol. 63, issue 2, No 5, 577 pages

Abstract: Abstract This paper examines the relationship between product life cycle and book-to-market effect on cross-sectional stock returns. While previous papers suggest that the book-to-market effect is related to a firm’s market value and fundamental value, this paper examines the product life cycle, which directly affects future cash flows. We find that the book-to-market effect is stronger for firms with a long product life cycle, which is consistent with the mispricing story in explaining the book-to-market effect. We further find that the role of product life cycle is more critical for firms with high investor limited attention, and that the product life cycle in part explains intangible returns.

Keywords: Book-to-market; Product life cycle; Stock returns (search for similar items in EconPapers)
JEL-codes: G11 G14 G40 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s11156-024-01270-8

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