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Excess returns on idiosyncratic profitability: Evidence from a hedge portfolio strategy

Miaodi Han et al.

Australian Journal of Management2026https://doi.org/10.1177/03128962261425895article
AJG 2ABDC A
Weight
0.50

Abstract

This study investigates the influence of firm-idiosyncratic profitability on stock pricing decisions and whether a trading strategy based on idiosyncratic profitability can generate significant hedge portfolio abnormal returns. We disaggregate a firm’s profitability into three components—a market component, an industry component, and a firm-specific component, which we label as idiosyncratic profitability. We document that a trading strategy based on idiosyncratic profitability generates significant hedge portfolio returns. Our results are robust in that our hedge portfolio returns still exist after controlling for known risk factors and previously documented anomalies. JEL Classifications: C58; G11; G14; M20; M41

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https://doi.org/https://doi.org/10.1177/03128962261425895

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@article{miaodi2026,
  title        = {{Excess returns on idiosyncratic profitability: Evidence from a hedge portfolio strategy}},
  author       = {Miaodi Han et al.},
  journal      = {Australian Journal of Management},
  year         = {2026},
  doi          = {https://doi.org/https://doi.org/10.1177/03128962261425895},
}

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Evidence weight

0.50

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.50 × 0.4 = 0.20
M · momentum0.50 × 0.15 = 0.07
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

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