Do Cash Flows of Growth Stocks Really Grow Faster?
Huafeng (Jason) Chen
Texas A&M University
September 18, 2014
Contrary to conventional wisdom, growth stocks (low book-to-market stocks) do not have substantially higher future cash-flow growth rates 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.
Number of Pages in PDF File: 61
JEL Classification: G12
Date posted: August 3, 2011 ; Last revised: September 19, 2014