Asset tangibility, industry representation and the cross section of equity returns

Paul Docherty, Howard Chan, Steve Easton

Research output: Contribution to journalArticleResearchpeer-review

11 Citations (Scopus)


Recent theory relates expected returns and covariant risk to the investment decisions of a firm across certain stages of the business cycle. Using the Australian accounting environment that provides a wider scope for the capitalisation of intangible assets compared with the United States, this paper tests the relationship between asset tangibility and returns within the Fama and MacBeth (1973) framework. A relationship is found to exist between asset tangibility and the cross-section of equity returns. This relationship is most evident in the materials industry, which is characterised by irreversible, firm-specific assets. These results persist after controlling for firm characteristics that Fama and French (1992) show are related to returns, although the effect is largely driven by microcap stocks.

Original languageEnglish
Pages (from-to)75-87
Number of pages13
JournalAustralian Journal of Management
Issue number1
Publication statusPublished - Apr 2011
Externally publishedYes


  • asset pricing
  • cross-section
  • industry
  • tangibility of assets

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