Seminar “Risk Exposure to Investment Shocks: A New Approach Based on Investment Data“ by Lorenzo Garlappi, University of British Columbia
Please register by sending an email to tl.bl@CT with your full name, surname and university/work-place until 18 December, 13:00.
Seminar language: English
Abstract:
We propose a new approach to determine firms' return exposure to investment-specific technology (IST) shocks. Based on the idea that IST shocks affect firms through their cost of investment, we show analytically that firms' return exposure to IST shocks can be estimated from observable investment data. We apply our investment-based approach to the cross-section of book-to-market portfolios and find that value firms have higher exposure to IST shocks than growth firms, in contrast to the pattern estimated from IST proxies. The empirical findings provide an independent perspective on the economic mechanism through which IST shocks affect asset prices.