New asset pricing model outperforms traditional models, revolutionizing investment strategies.
The article presents a new model that uses investment growth rates to predict asset returns. The model outperforms traditional models like the CAPM and Fama-French in pricing portfolios. It explains more of the variation in asset returns and shows that size and book-to-market factors are less important when investment growth rates are considered. The model successfully prices portfolios based on size and book-to-market characteristics using only macroeconomic variables.