A Further Analysis of Asset Growth Effects and Firm Characteristics

• Main Authors: Shen-Yu Cheng, 程舜鈺
• Other Authors: Chin-Wen Hsin
• Format: Others
• Language: en_US
• Published: 2016
• Online Access: http://ndltd.ncl.edu.tw/handle/91257390912865172425

碩士 === 元智大學 === 財務金融暨會計碩士班(財務金融學程) === 104 === The literature has documented the negative relationship between asset growth rate and subsequent stock return for the US market and certain international markets. Using extended sample period and Datastream data, this study however finds that such asset growth effect is non-linear across stocks in the US market and absent from the Canadian market. Specifically, the low-asset-growth and high-next-period-return relationship is observed across most stocks while not applicable for those US stocks with bottom ten-percentile asset growth rates. The finding is corroborated by long-short portfolio return tests and by Fama-MacBeth regression tests when firm characteristics are being controlled for. This study further applies idiosyncratic volatility as proxy for limits to arbitrage, and the test results do not render consistent evidence in support of the mis-pricing theory in explaining the asset growth effect.