The 215th Finance and Accounting Academic Forum

Source: Updated:2016/10/24/

Time: July 6th 2016( Wednesday)15:00-16:30

Location: Room 501, Jiageng 2-501

Moderator::George Wu, AssistantProfessor of Finance, Xiamen University

Topic: Prospective book-to-market ratio and expectedstock returns

Presenter:Yuzhao Zhang, Assistant Professor of Finance, Rutgers, The State Universityof New Jersey

Abstract:

We propose a novel stock return predictor, the \prospectivebook-to-market", as the present value of expected future demeanedbook-to-market ratios. We find that the aggregate prospective book-to-market ratiocan significantly predict stock market return, with adjusted R-squared between5.0% and 5.8% out-of-sample. In addition, a high-minus-low investment strategybased on prospective book-to-market ratio generates significant monthly alpharanging from 13.4 to 20.8 basis points across various factor models, and thereturn spread is also shown to be non-redundant as an alternative value factorin pricing cross-section of stock returns.

Personal Profile

Yuzhao Zhang earned his PhD in Finance from University of California Los Angeles, USA. He has published papers injournals such as Journal of Law andEconomics, and Journal of Banking andFinance.