Abstract

http://ssrn.com/abstract=1903904
 
 

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Do Cash Flows of Growth Stocks Really Grow Faster?


Huafeng (Jason) Chen


University of British Columbia (UBC) - Sauder School of Business

August 15, 2012


Abstract:     
Contrary to conventional wisdom, growth stocks (low book-to-market stocks) do not have substantially higher future cash-flow growth rates or substantially longer cash-flow durations than value stocks, in both rebalanced and buy-and-hold portfolios. The efficiency growth, survivorship and look-back biases, and rebalancing effect help explain the results. This finding suggests that duration alone is unlikely to explain the value premium. Using rebalanced portfolios, I find that, consistent with asset pricing models that feature countercyclical risk premiums, there is a growth premium in the cross section of stock returns. That is, risky assets with higher expected cash-flow growth rates have higher expected returns, after controlling for cash-flow risks.

Number of Pages in PDF File: 78

JEL Classification: G12

working papers series


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Date posted: August 3, 2011 ; Last revised: August 18, 2012

Suggested Citation

Chen, Huafeng (Jason), Do Cash Flows of Growth Stocks Really Grow Faster? (August 15, 2012). Available at SSRN: http://ssrn.com/abstract=1903904 or http://dx.doi.org/10.2139/ssrn.1903904

Contact Information

Huafeng (Jason) Chen (Contact Author)
University of British Columbia (UBC) - Sauder School of Business ( email )
2053 Main Mall
Vancouver, BC V6T 1Z2
Canada
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