Asset tangibility, industry representation and the cross section of equity returns

Paul Docherty, Howard Chan and Steve Easton
Additional contact information
Paul Docherty: Newcastle Business School, The University of Newcastle, Australia, Paul.Docherty@newcastle.edu.au
Howard Chan: Department of Finance, The University of Melbourne, Australia
Steve Easton: Newcastle Business School, The University of Newcastle, Australia

Australian Journal of Management, 2011, vol. 36, issue 1, 75-87

Abstract: Recent theory relates expected returns and covariant risk to the investment decisions of a firm across certain stages of the business cycle. Using the Australian accounting environment that provides a wider scope for the capitalisation of intangible assets compared with the United States, this paper tests the relationship between asset tangibility and returns within the Fama and MacBeth (1973) framework. A relationship is found to exist between asset tangibility and the cross-section of equity returns. This relationship is most evident in the materials industry, which is characterised by irreversible, firm-specific assets. These results persist after controlling for firm characteristics that Fama and French (1992) show are related to returns, although the effect is largely driven by microcap stocks.

Keywords: asset pricing; cross-section; industry; tangibility of assets (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:ausman:v:36:y:2011:i:1:p:75-87

DOI: 10.1177/0312896211399200

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