Hello Everyone,

I have a question regarding "cross$-$sectional asset pricing $"$ model. We are running cross sectional asset pricing regression, where we have N companies. We want to run excess returns on companies Market value, Investment, R&D expense and also changes in Return on Asset $($ROA$)$

The way we calculate Change in ROA as$,$ take ROA $($t$+3)-$ ROA $($t$)$ which we use to against the excess return for the stock for month $($t$)$ to answer if the cross sectional variation in the stock returns are due to misspricing of market not properly incorporating the information about the firms future profit growth.

Thus, I was wondering would it be a correct appraoch $?$

Thank you so much