The Asset Growth Effect: Insights from International Equity Markets
University of Alberta - School of Business; University of Alberta - Department of Finance and Statistical Analysis
HKU, Faculty of Business and Economics
University of Iowa - Henry B. Tippie College of Business
University of Rhode Island - College of Business Administration
July 1, 2012
Firms with higher asset growth rates subsequently experience lower stock returns in international equity markets, consistent with the U.S. evidence. This negative effect of asset growth on returns is stronger in more developed capital markets and markets where stocks are more efficiently priced, but is unrelated to country characteristics representing limits to arbitrage, investor protection, and accounting quality. The evidence suggests that the cross-sectional relation between asset growth and stock return is more likely due to an optimal investment effect than due to over-investment, market timing, or other forms of mispricing.
Number of Pages in PDF File: 58
Keywords: asset growth effect, investment-based asset pricing, international capital market
JEL Classification: G12, G14, G15
Date posted: March 16, 2011 ; Last revised: January 27, 2013
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