Welcome to the 2018 AFS Annual Meeting, being held this year, in conjunction with FPA in Chicago!
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Wednesday, October 3 • 3:30pm - 4:30pm
I3a - The Sustainable Growth Rate, DuPont Analysis, and the Cross-Section of Returns

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We investigate the sustainable growth rate and DuPont components for asset pricing and portfolio performance evaluation. Employing data from 1990 through 2012 and a three-component DuPont ROE, we present evidence indicating that long short investment strategies based on sustainable growth rate, ROE, profit margin, and asset turnover yield significant positive alphas while long-short investment strategies based on the equity multiplier yield significant negative alphas. Surprisingly, the long-short portfolios based on equity multiplier produced significant alpha even in the following two quarters.

Author(s): Yuntaek Pae, Omid Sabbaghi, Navid Sabbaghi


Yuntaek Pae

Assistant Professor of Finance, Central Washington University

Wednesday October 3, 2018 3:30pm - 4:30pm CDT
Michigan 1C