Firm Expansion and Stock Price Momentum

Review of Finance, Forthcoming

57 Pages Posted: 1 Oct 2010 Last revised: 24 Jun 2013

See all articles by Peter M. Nyberg

Peter M. Nyberg

Aalto University

Salla Pöyry

Hanken School of Economics

Date Written: June 24, 2013


We document a significant and robust connection between firm-level asset changes and return momentum. Momentum profits are large and significant for firms that have experienced large asset expansions or contractions, whereas they otherwise are small and often insignificant. The interaction pattern is not subsumed by previously documented drivers of momentum and shows up in market states where prior literature has documented an absence of momentum profits. Furthermore, we find a positive time-series relationship between aggregate asset growth and return momentum, and the effect of aggregate asset growth is stronger than that of variables related to business cycles and investor sentiment. While most existing models of firm investment and momentum cannot explain our results, recent real options models appear to hold the most promise.

Keywords: Asset growth, momentum

JEL Classification: G12

Suggested Citation

Nyberg, Peter Mikael and Pöyry, Salla, Firm Expansion and Stock Price Momentum (June 24, 2013). Review of Finance, Forthcoming, Available at SSRN: or

Peter Mikael Nyberg (Contact Author)

Aalto University ( email )

P.O. Box 21210
Helsinki, 00101

Salla Pöyry

Hanken School of Economics ( email )

P.O. Box 479
FI-00101 Helsinki, 00101

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