This paper by Kent Daniel and Sheridan Titman decomposes stock returns into components attributable to tangible and intangible information. The authors find that intangible information reliably predicts future stock returns, while tangible information has no forecasting power. They argue that this finding challenges both traditional asset pricing models and models based on psychological factors. The study decomposes stock returns into tangible returns, which are linked to fundamental accounting performance, and intangible returns, which are orthogonal to this information. The authors use a cross-sectional regression approach to calculate tangible and intangible returns, finding that past intangible returns are strongly negatively correlated with future returns, while past tangible returns have no significant impact. They also introduce a composite share issuance variable to capture additional intangible information, which is negatively related to future returns. The results suggest that intangible returns may reflect mispricing or changes in the firm's risk and discount rates. The paper discusses the implications of these findings for both risk-based and behavioral explanations of stock returns.This paper by Kent Daniel and Sheridan Titman decomposes stock returns into components attributable to tangible and intangible information. The authors find that intangible information reliably predicts future stock returns, while tangible information has no forecasting power. They argue that this finding challenges both traditional asset pricing models and models based on psychological factors. The study decomposes stock returns into tangible returns, which are linked to fundamental accounting performance, and intangible returns, which are orthogonal to this information. The authors use a cross-sectional regression approach to calculate tangible and intangible returns, finding that past intangible returns are strongly negatively correlated with future returns, while past tangible returns have no significant impact. They also introduce a composite share issuance variable to capture additional intangible information, which is negatively related to future returns. The results suggest that intangible returns may reflect mispricing or changes in the firm's risk and discount rates. The paper discusses the implications of these findings for both risk-based and behavioral explanations of stock returns.