The Cash Conversion Cycle Spread

58 Pages Posted: 8 May 2017 Last revised: 5 Aug 2018

See all articles by Baolian Wang

Baolian Wang

University of Florida - Department of Finance, Insurance and Real Estate

Date Written: August 1, 2018


The cash conversion cycle (CCC) refers to the time span between the outlay of cash for purchases to the receipt of cash from sales. It is a widely used metric to gauge the effectiveness of a firm’s management and intrinsic need for external financing. This paper shows that a zero-investment portfolio that buys stocks in the lowest CCC decile and shorts stocks in the highest CCC decile earns 5 to 7% alphas per year. The CCC effect is prevalent across industries and remains even for large capitalization stocks. The CCC effect is distinct from the known return predictors. The returns of high-CCC stocks are more sensitive to the health of the financial intermediaries than low-CCC stocks. This suggests that the CCC-based strategy cannot be explained by the financial intermediary leverage risk.

Keywords: Cash conversion cycle, intermediary asset pricing

JEL Classification: G02, G12

Suggested Citation

Wang, Baolian, The Cash Conversion Cycle Spread (August 1, 2018). Journal of Financial Economics (JFE), Forthcoming, Available at SSRN: or

Baolian Wang (Contact Author)

University of Florida - Department of Finance, Insurance and Real Estate ( email )

314 Stuzin Hall
Gainesville, FL 32611
United States


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