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Friday Seminar - "What Drives Booms and Busts in Value?" - Christopher Polk (London School of Economics and Political Science)

Christopher Polk, Professor of Finance at London School of Economics and Political Science (LSE), will present his research at SSE main building (Room A720) on Friday, April 19 at 10:30 CET.

"What Drives Booms and Busts in Value?"

Abstract: Value investing delivers volatile returns, with large drawdowns during both market booms and busts. This paper interprets these returns through an intertemporal CAPM, which predicts that aggregate cash flow, discount rate, and volatility news all move value returns. We document that indeed these shocks explain a large fraction of quarterly value returns over the last 60 years. We also distinguish between the intra-industry and inter-industry components of value, showing that the ICAPM explains the former better. Finally, we develop a novel methodology to perform this decomposition at the daily frequency, using it to interpret value returns during the Covid-19 pandemic.

Read the paper

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