Do Cash Flows of Growth Stocks Really Grow Faster?
Huafeng (Jason) Chen
Tsinghua University - PBC School of Finance
November 10, 2016
Journal of Finance, Forthcoming
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.
The Internet Appendix for this paper may be found at http://ssrn.com/abstract=2868277.
Number of Pages in PDF File: 60
JEL Classification: G12
Date posted: August 3, 2011 ; Last revised: November 13, 2016