dc.creator | Kraft, Holger | |
dc.creator | Schwartz, Eduardo S. | |
dc.creator | Weiss, Farina | |
dc.date.accessioned | 2021-09-28T09:15:49Z | |
dc.date.available | 2021-09-28T09:15:49Z | |
dc.date.issued | 2013-11-01 | |
dc.identifier.uri | https://fif.hebis.de/xmlui/handle/123456789/2107 | |
dc.description.abstract | "This paper studies the relation between firm value and a firm's growth options. We find strong empirical evidence that (average) Tobin's Q increases with firm-level volatility. The significance mainly comes from R&D firms, which have more growth options than non-R&D firms. By decomposing firm-level volatility into its systematic and unsystematic part, we document that only idiosyncratic volatility has a significant effect on valuation. Second, we analyze the relation of stock returns to realized contemporaneous idiosyncratic volatility and R&D expenses. Single sorting on idiosyncratic volatility yields a significant negative relation between portfolio alphas and contemporaneous idiosyncratic volatility for non-R&D portfolios, whereas in a four-factor model the portfolio alphas of R&D portfolios are all positive. Double sorting on idiosyncratic volatility and R&D expenses also reveals these differences between R&D and non-R&D firms. To control for several explanatory variables simultaneously, we also run panel regressions of firm-level alphas which confirm the relative importance of idiosyncratic volatility that is amplified by R&D expenses. Finally, we show that our results are robust to the definition of idiosyncratic volatility. We tease out the \true"" idiosyncratic volatilities by performing a principal-component analysis on the residuals of Fama-French regressions and find that our main results still hold for this alternative definition of idiosyncratic volatility." | |
dc.rights | Attribution-ShareAlike 4.0 International | |
dc.rights.uri | http://creativecommons.org/licenses/by-sa/4.0/ | |
dc.subject | Financial Markets | |
dc.subject | Transparency Lab | |
dc.title | Growth Options and Firm Valuation | |
dc.type | Working Paper | |
dcterms.references | https://fif.hebis.de/xmlui/handle/123456789/1420?FRED | |
dcterms.references | https://fif.hebis.de/xmlui/handle/123456789/1379?CRSP | |
dcterms.references | https://fif.hebis.de/xmlui/handle/123456789/1376?Compustat | |
dc.source.filename | 6_SSRN-id2224014 | |
dc.identifier.safeno | 6 | |
dc.subject.keywords | firm valuation | |
dc.subject.keywords | real options | |
dc.subject.keywords | volatility | |
dc.subject.keywords | r&d expenses | |
dc.subject.keywords | pca | |
dc.subject.jel | G12 | |
dc.subject.topic1 | yield | |
dc.subject.topic1 | pay | |
dc.subject.topic1 | true | |
dc.subject.topic2 | option | |
dc.subject.topic2 | roa | |
dc.subject.topic2 | compustat | |
dc.subject.topic3 | study | |
dc.subject.topic3 | hodrick | |
dc.subject.topic3 | finally | |
dc.subject.topic1name | Financial Markets | |
dc.subject.topic2name | Corporate Finance | |
dc.subject.topic3name | Saving and Borrowing | |
dc.identifier.doi | 10.2139/ssrn.2224014 | |