asset growth(资产增长率与股价的关系)
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abnormal return, while high growth firms have negative abnormal return • Asset growth effect is most consistent with this explanation
Conclusion
• Stock return models are increasingly improved • Asset growth is the strongest predictor relative to CAPM,
Three-factor model and Four-factor model
Thanks for your attention!
Reference
• Cooper, M., Gulen, H. and Schill, M. (n.d.). Asset Growth and the Cross-Section of Stock Returns. SSRN Electronic Journal.
Comparing With Other Determinants
Asset Growth appears to be the strongest determinant
Decomposing Asset Growth
Decomposing Asset Growth
• Components of asset
• Negative relationship between returns and components is never as strong as overall Asset Growth
Risk-Based or Mispricing Explanation
• Risk-Based:
• Investment increase, overall risk reduces, a negative between investment and expected return.
• Cooper, M., Gulen, H. and Schill, M. (n.d.). The Asset Growth Effect in Stock Returns. SSRN Electronic Journal.
• A long-short strategy: buy the lowest decile and sell the highest decile • After controlling for the Fama-French three factors, the long-short
strategy has an alpha of 8% per year
• Standard risk return model do not explain the effect
• Mispricing:
• Investors overreact to past firm growth rates • Earning announcements for low-growth firms are associated with positive
growth rates (from low to high) • Formed from July of year t to June of year t+1
• In accordence with Fama and French (1992)
• Rebalanced every year
Cross-Sectional Tests
Test results on 10 Equal-Weighted Portfolios
Cross-Sectional Tests
Test results on 10 Value-Weighted Portfolios
Cross-Sectional Tests
• The asset growth effect is consistent throughout the sample period across all 10 deciles for firms of both small and large capitalization
Spinoffs Repurchases Debt repayments Dividend initiations
Low Abnomal Return
High Abnomal Return
Caculating Asset Growth
Constructing Portfolios
• 10 portfolios • Stocks are allocated into deciles based on annual asset
-MichaeSchill (2008)
Asset Growth Effect
Asset Expansion
Acquisitions Equity and debt offerings Loan initiations
Asset Contraction
• Significant: current assets, PPE, other assets • Not Significant: cash
• Components of liability
• Significant: stock, debt, operating liabilities • Not Significant: retained earnings
Asset Growth
Asset Growth and Stock Return
“We document a strong negative relationship between the growth of total firm assets and subsequent firm stock returns using a broad sample of U.S. stocks.”
Conclusion
• Stock return models are increasingly improved • Asset growth is the strongest predictor relative to CAPM,
Three-factor model and Four-factor model
Thanks for your attention!
Reference
• Cooper, M., Gulen, H. and Schill, M. (n.d.). Asset Growth and the Cross-Section of Stock Returns. SSRN Electronic Journal.
Comparing With Other Determinants
Asset Growth appears to be the strongest determinant
Decomposing Asset Growth
Decomposing Asset Growth
• Components of asset
• Negative relationship between returns and components is never as strong as overall Asset Growth
Risk-Based or Mispricing Explanation
• Risk-Based:
• Investment increase, overall risk reduces, a negative between investment and expected return.
• Cooper, M., Gulen, H. and Schill, M. (n.d.). The Asset Growth Effect in Stock Returns. SSRN Electronic Journal.
• A long-short strategy: buy the lowest decile and sell the highest decile • After controlling for the Fama-French three factors, the long-short
strategy has an alpha of 8% per year
• Standard risk return model do not explain the effect
• Mispricing:
• Investors overreact to past firm growth rates • Earning announcements for low-growth firms are associated with positive
growth rates (from low to high) • Formed from July of year t to June of year t+1
• In accordence with Fama and French (1992)
• Rebalanced every year
Cross-Sectional Tests
Test results on 10 Equal-Weighted Portfolios
Cross-Sectional Tests
Test results on 10 Value-Weighted Portfolios
Cross-Sectional Tests
• The asset growth effect is consistent throughout the sample period across all 10 deciles for firms of both small and large capitalization
Spinoffs Repurchases Debt repayments Dividend initiations
Low Abnomal Return
High Abnomal Return
Caculating Asset Growth
Constructing Portfolios
• 10 portfolios • Stocks are allocated into deciles based on annual asset
-MichaeSchill (2008)
Asset Growth Effect
Asset Expansion
Acquisitions Equity and debt offerings Loan initiations
Asset Contraction
• Significant: current assets, PPE, other assets • Not Significant: cash
• Components of liability
• Significant: stock, debt, operating liabilities • Not Significant: retained earnings
Asset Growth
Asset Growth and Stock Return
“We document a strong negative relationship between the growth of total firm assets and subsequent firm stock returns using a broad sample of U.S. stocks.”