Exploring the Asset Growth Effect in the Australian Equity Market

26 Pages Posted: 8 Jun 2010

See all articles by Jenni L. Bettman

Jenni L. Bettman

Australian National University (ANU)

Mitch Kosev

Australian National University (ANU)

Stephen Sault

Australian National University (ANU); Financial Research Network (FIRN)

Multiple version iconThere are 2 versions of this paper

Date Written: April 7, 2010

Abstract

This study presents the first empirical evidence on the existence of the asset growth effect in the Australian equity market. Specifically, we analyse all Australian listed firms over the period from 1998 to 2008, inclusive, to investigate whether the rate of growth in total assets has predictive power over subsequent stock returns. In addition, we conduct multivariate analysis of the effect, providing the first application of dynamic panel methods using difference GMM and system GMM to the asset growth literature. Results indicate that a significant asset growth effect exists when employing equal-weighted returns. However, this result disappears when utilising value-weighted returns. In light of this, we further investigate the asset growth effect employing multivariate analysis, which attempts to control for the influence of firm size. These results fail to confirm the existence of an asset growth effect. We argue that our initial evidence of an effect is due to the overstated influence of small stocks under equal-weighting. Consequently, we are able to conclude from these results that over the period of our analysis, the asset growth effect does not exist in the Australian equity market.

Keywords: Asset Growth, Dynamic Panel Methods

JEL Classification: G14

Suggested Citation

Bettman, Jenni L. and Kosev, Mitch and Sault, Stephen, Exploring the Asset Growth Effect in the Australian Equity Market (April 7, 2010). Available at SSRN: https://ssrn.com/abstract=1622034 or http://dx.doi.org/10.2139/ssrn.1622034

Jenni L. Bettman

Australian National University (ANU) ( email )

Canberra, Australian Capital Territory 2601
Australia

Mitch Kosev

Australian National University (ANU) ( email )

Canberra, Australian Capital Territory 2601
Australia

Stephen Sault (Contact Author)

Australian National University (ANU) ( email )

Canberra ACT 0200, 2601
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

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