The Usefulness of Book‐to‐Market and ROE Expectations for Explaining UK Stock Returns
基于基本面估值视角，建立对数线性模型，用当前账面市值比、未来账面市值比预期和净资产收益率预期三个变量解释英国股票横截面回报，发现这些变量在加入风险代理变量后仍高度显著，对预测股票回报有潜在价值。
Abstract: The fundamental valuation perspective on stock returns suggests that book‐to‐market will be positively related to returns if market value of equity equals future expected cash flows discounted at the expected return and book value proxies for future cash flows. Building on this perspective, we develop a log linear model which includes expectations of future BM and ROE in addition to current BM as explanatory variables for future stock returns. We show that these three variables explain a significant part of UK cross‐sectional stock returns and that they remain highly statistically significant after including additional risk proxy variables. This supports relevance of fundamental valuation based firm characteristics for explaining stock returns and indicates their potential usefulness for predicting future stock returns.