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Asset Growth and the Cross‐Section of Stock Returns
Author(s) -
COOPER MICHAEL J.,
GULEN HUSEYIN,
SCHILL MICHAEL J.
Publication year - 2008
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.2008.01370.x
Subject(s) - stock (firearms) , capitalization , market capitalization , economics , capital asset pricing model , growth stock , financial economics , econometrics , asset (computer security) , stock market , monetary economics , restricted stock , mechanical engineering , paleontology , philosophy , linguistics , computer security , horse , computer science , engineering , biology
We test for firm‐level asset investment effects in returns by examining the cross‐sectional relation between firm asset growth and subsequent stock returns. Asset growth rates are strong predictors of future abnormal returns. Asset growth retains its forecasting ability even on large capitalization stocks. When we compare asset growth rates with the previously documented determinants of the cross‐section of returns (i.e., book‐to‐market ratios, firm capitalization, lagged returns, accruals, and other growth measures), we find that a firm's annual asset growth rate emerges as an economically and statistically significant predictor of the cross‐section of U.S. stock returns.