Pro tability Premium : Risk or Mispricing ? Current Draft : November 1 st 2015
نویسنده
چکیده
This paper presents evidence that the stock return premium associated with profitability is hard to reconcile with risk-based explanations but is consistent with expectation errors. Firms with lower pro tability are more volatile, su er greater drawdowns and are more sensitive to macroeconomic conditions. This means that the pro table rms are actually less risky by most measures and perform better during economic downturns. In addition, there is a monotonic relationship between pro tability and forecast error. Analysts tend to be overoptimistic for low pro tability rms relative to high pro tability rms. Surprisingly, this mis-expectation can persist even up to ve years into the future. JEL Classi cations: E32, G12, G14
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