Overreaction to Growth Opportunities: An Explanation of the Asset Growth Anomaly
30 Pages Posted: 19 May 2020
Date Written: September 2019
The negative relation between asset growth and subsequent stock returns is known as the asset growth anomaly. We propose that overreaction to growth opportunities is the source of the asset growth anomaly. This suggests that growth firms as opposed to mature firms, and firms with longer series of asset growth should experience a stronger asset growth anomaly. Our evidence supports these predictions.
Keywords: anomaly, asset growth, growth opportunities, overreaction, US market
Suggested Citation: Suggested Citation