Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/303708 
Year of Publication: 
2022
Citation: 
[Journal:] Cogent Economics & Finance [ISSN:] 2332-2039 [Volume:] 10 [Issue:] 1 [Article No.:] 2098607 [Year:] 2022 [Pages:] 1-20
Publisher: 
Taylor & Francis, Abingdon
Abstract: 
This paper provides insights about the information content and predictive ability of the intrinsic value of the firm in an asset pricing context. The intrinsic value of a firm is of great importance for both the management and the investors of the company. We seek to assess whether the value-to-price (V/P) ratio, estimated with the residual income model (RIM), can explain the cross section of stocks returns. The study enhances the literature in the area of asset pricing by developing a new intrinsic value risk factor, which is a zero-investment portfolio that is neutral to the size, book-to-market equity ratio and the momentum effect. Furthermore, we incorporate in the RIM, for the first time, a time-series model that does not rely on analysts' forecasts for the estimation of the key parameters of the model. A unique dataset from Greece, Italy, Spain and Portugal is utilized, from 31/12/2000 to 30/6/2019, that has a number of idiosyncrasies that are not observable in other developed markets, contributing by this way to the necessary accumulation of non-US research. The results show that the new intrinsic value risk factor absorbs the information content of the HML factor and explains better the cross section of returns, mainly for small size and high book to market value companies.
Subjects: 
Corporate Finance
Investment & Securities
Financial Accounting
Financial Management
Risk Management
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.