Cash Position Forecasts and Stock Market Portfolio Returns

28 Pages Posted: 1 Jun 2010

See all articles by Zane L. Swanson

Zane L. Swanson

University of Central Oklahoma

Richard Alltizer

University of Central Oklahoma

Date Written: May 1, 2010

Abstract

Several articles in highly regarded news outlets over the last decade have argued that firms holding relatively more cash are favored by investors. The contention is those firms holding cash will have better access to good investment prospects. This view contradicts the Jensen (1986) free cash flow proposition. This study examines the investment returns of portfolios created according to trading strategies based on expected “good” news versus “bad” news predictions of cash holdings. Results indicate that firms holding more cash than expected have superior investment returns.

Keywords: Investments, Agency Theory, Cash, Forecasting

JEL Classification: D40, G11, G14, M41

Suggested Citation

Swanson, Zane L. and Alltizer, Richard, Cash Position Forecasts and Stock Market Portfolio Returns (May 1, 2010). Available at SSRN: https://ssrn.com/abstract=1618990 or http://dx.doi.org/10.2139/ssrn.1618990

Zane L. Swanson (Contact Author)

University of Central Oklahoma ( email )

100 North University Drive
Edmond, OK 73034
United States

Richard Alltizer

University of Central Oklahoma ( email )

100 North University Drive
Edmond, OK 73034
United States

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