Aggregation , Capital Heterogeneity , and the Investment CAPM

@inproceedings{Goncalves2017AggregationC,
  title={Aggregation , Capital Heterogeneity , and the Investment CAPM},
  author={Adriano Ramos Goncalves and Chen Xue},
  year={2017}
}
This paper provides a careful treatment of aggregation, and to a lesser extent, capital heterogeneity in the investment CAPM. Firm-level investment returns are constructed from firm-level variables, and aggregated to the portfolio level to match with portfoliolevel stock returns. Current assets form a separate production input besides physical capital. The model fits well the value, momentum, investment, and profitability premiums simultaneously, and partially explains the positive stock… CONTINUE READING

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