What is Behind the Asset Growth and Investment Growth Anomalies?
Existing studies show that firm asset and investment growth predict cross-sectional stock returns. Firms that shrink their assets or investments subsequently earn higher returns than firms that expand their assets or investments. I show that the superior returns of the low asset and investment growt...
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| Format: | text |
| Language: | English |
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Institutional Knowledge at Singapore Management University
2011
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| Online Access: | https://ink.library.smu.edu.sg/lkcsb_research/3159 https://ink.library.smu.edu.sg/context/lkcsb_research/article/4158/viewcontent/FuFJ2011Asset_and_Investment_Growth_Anomalies_FMA.pdf |
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| Institution: | Singapore Management University |
| Language: | English |
| Summary: | Existing studies show that firm asset and investment growth predict cross-sectional stock returns. Firms that shrink their assets or investments subsequently earn higher returns than firms that expand their assets or investments. I show that the superior returns of the low asset and investment growth portfolios are due to the omission of delisting returns in CRSP monthly stock return file and that the poor returns of the high asset and investment growth portfolios are largely driven by the subsample of firms that have issued large amounts of debt or equity in the previous year. Controlling for the effects of the delisting bias and external financing, I do not find an independent effect of asset or investment growth on stock returns. |
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