VGSF - WU Vienna - LC

Robert Korajczyk, Kellogg School of Management

Campus WU D3.0.225 11:00 - 12:15

Organizer VGSF

As part of the ser­ies of the "Fin­ance Re­search Sem­inar", VGSF wel­comes Robert Kora­jczyk from Kel­logg School of Man­age­ment to present his re­search pa­per.
Per­sonal Webpage


An Intan­gibles-­Ad­jus­ted Prof­it­ab­il­ity Factor

We ad­just the Fama and French (2015) prof­it­ab­il­ity factor to re­flect in­vest­ment in intan­gible as­sets. Our intan­gible in­vest­ment-­ad­jus­ted prof­it­ab­il­ity factor has sig­ni­fic­ant al­pha re­l­at­ive to many ex­tant mul­ti-­factor as­set pri­cing mod­els, in­clud­ing the Fama-­French five factor model. The im­prove­ment is con­sist­ent with the pre­dic­tion of the di­vidend dis­count model for equity valu­ation: ac­count­ing for in­vest­ment in intan­gible as­sets helps im­prove fore­casts of the cross sec­tion of fu­ture op­er­at­ing cash flows, espe­cially at longer ho­ri­zons. The Fama-­French five-­factor model prices the cross sec­tion of as­set re­turns bet­ter than many as­set pri­cing mod­els when we re­place its prof­it­ab­il­ity factor with our ad­jus­ted prof­it­ab­il­ity factor.  A num­ber of an­om­alies in the lit­er­at­ure (e.g., mo­mentum and op­er­at­ing lever­age) have in­sig­ni­fic­ant al­phas in this intan­gibles in­vest­ment-­ad­jus­ted model.

Back to overview