Stabsseminar med Ilan Cooper

Fredagens stabsseminar på Institutt for foretak blir ved Ilan Cooper fra BI.

30.01.2003 - Anette W. Petersen

Tema: Asset Pricing Implications of Non-Convex Adjustment Costs of Investment

Tid: Fredag 31. januar, kl. 12.15-13.30

Sted: Aud. 24

Abstract:
This paper links the firm's book-to-market ratio and its conditional market beta. If real investment is largely irreversible, the book value of assets of a distressed firm remains fairly constant and its book-to-market ratio is high. Returns on such a firm are sensitive to aggregate conditions. The firm's extra installed capital capacity allows it to expand production easily in response to a positive aggregate shock without undertaking any costly investment, yielding a large payoff to the equity holders. In contrast, a low book-to-market firm must undertake investment in order to fully benefit from the shock. Thus, high book-to-market firms have a higher systematic risk. The paper provides empirical evidence that supports the time series predictions of the model.

Paper er tilgjengelig på instituttets nettside.

Kontaktperson: Hans K. Hvide (59283).