Growth or Glamour? Fundamentals and Systematic Risk in Stock Returns
John Campbell (),
Christopher Polk and
No 2082, Harvard Institute of Economic Research Working Papers from Harvard - Institute of Economic Research
The cash flows of growth stocks are particularly sensitive to temporary movements in aggregate stock prices (driven by movements in the equity risk premium), while the cash flows of value stocks are particularly sensitive to permanent movements in aggregate stock prices (driven by market-wide shocks to cash flows. ) Thus the high betas of growth stocks with the market's discount-rate shocks, and of value stocks with the market's cash-flow shocks, are determined by the cash-flow fundamentals of growth and value companies. Growth stocks are not merely "glamour stocks" whose systematic risks are purely driven by investor sentiment. More generally, accounting measures of firm-level risk have predictive power for firms' betas with market-wide cash flows, and this predictive power arises from the behavior of firms' cash flows. The systematic risks of stocks with similar accounting characteristics are primarily driven by the systematic risks of their fundamentals.
References: Add references at CitEc
Citations: View citations in EconPapers (4) Track citations by RSS feed
Downloads: (external link)
Journal Article: Growth or Glamour? Fundamentals and Systematic Risk in Stock Returns (2010)
Working Paper: Growth or Glamour? Fundamentals and Systematic Risk in Stock Returns (2010)
Journal Article: Growth or glamour? fundamentals and systemic risk in stock returns (2005)
Working Paper: Growth or Glamour? Fundamentals and Systematic Risk in Stock Returns (2005)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:fth:harver:2082
Access Statistics for this paper
More papers in Harvard Institute of Economic Research Working Papers from Harvard - Institute of Economic Research Contact information at EDIRC.
Bibliographic data for series maintained by Thomas Krichel ().