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The Asset Growth Effect: Insights from International Equity Markets

58 Pages Posted: 16 Mar 2011 Last revised: 27 Jan 2013

Akiko Watanabe

University of Alberta - School of Business; University of Alberta - Department of Finance and Statistical Analysis

Yan Xu

HKU, Faculty of Business and Economics

Tong Yao

University of Iowa - Henry B. Tippie College of Business

Tong Yu

University of Cincinnati - Department of Finance - Real Estate

Multiple version iconThere are 2 versions of this paper

Date Written: July 1, 2012

Abstract

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.

Keywords: asset growth effect, investment-based asset pricing, international capital market

JEL Classification: G12, G14, G15

Suggested Citation

Watanabe, Akiko and Xu, Yan and Yao, Tong and Yu, Tong, The Asset Growth Effect: Insights from International Equity Markets (July 1, 2012). Available at SSRN: https://ssrn.com/abstract=1787237 or http://dx.doi.org/10.2139/ssrn.1787237

Akiko Watanabe

University of Alberta - School of Business ( email )

3-30A Business Building
University of Alberta
Edmonton, Alberta T6G 2R6
Canada
780-492-0385 (Phone)
780-492-3325 (Fax)

HOME PAGE: http://www.bus.ualberta.ca/awatanabe

University of Alberta - Department of Finance and Statistical Analysis ( email )

2-32C Business Building
Edmonton, Alberta T6G 2R6
Canada

HOME PAGE: http://www.bus.ualberta.ca/awatanabe

Yan Xu (Contact Author)

HKU, Faculty of Business and Economics ( email )

Pok Fu Lam Road
Hong Kong
Hong Kong

Tong Yao

University of Iowa - Henry B. Tippie College of Business ( email )

Acquisitions
5020 Main Library
Iowa City, IA 52242-1000
United States

Tong Yu

University of Cincinnati - Department of Finance - Real Estate ( email )

College of Business Administration
Cincinnati, OH 45221
United States
4019548606 (Phone)
4019548606 (Fax)

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