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Operating Hedge and Gross Profitability Premium

Leonid Kogan

出版	National Bureau of Economic Research, 2022
URL	http://books.google.com.hk/books?id=ZidXzwEACAAJ&hl=&source=gbs_api

註釋

We show theoretically that variable production costs lower systematic risk of firms' cash flows if capital and variable inputs are complementary in firms' production and input prices are pro-cyclical. In our dynamic model, this operating hedge effect is weaker for more profitable firms, giving rise to a gross profitability premium. Moreover, gross profitability and value factors are distinct and negatively correlated, and their premia are not captured by the CAPM. We estimate the model by the simulated method of moments, and find that its main implications for stock returns and cash flow dynamics are quantitatively consistent with the data.