The relationship between asset growth and the cross-section of stock returns

Gray, Philip and Johnson, Jessica (2011). The relationship between asset growth and the cross-section of stock returns. In: Fariborz Moshirian and I. Mathur, Journal of Banking and Finance. Proceedings of: Australasian Finance Conference: Global financial crisis, international financial architecture and regulation. 22nd Australasian Finance and Banking Conference, Sydney, NSW, Australia, (670-680). 16-18 December 2009. doi:10.1016/j.jbankfin.2010.06.005

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Author Gray, Philip
Johnson, Jessica
Title of paper The relationship between asset growth and the cross-section of stock returns
Conference name 22nd Australasian Finance and Banking Conference
Conference location Sydney, NSW, Australia
Conference dates 16-18 December 2009
Convener School of Banking and Finance, Australian School of Business, The University of New South Wales
Proceedings title Journal of Banking and Finance. Proceedings of: Australasian Finance Conference: Global financial crisis, international financial architecture and regulation   Check publisher's open access policy
Journal name Journal of Banking and Finance   Check publisher's open access policy
Place of Publication Amsterdam, Netherlands
Publisher Elsevier BV
Publication Year 2011
Year available 2010
Sub-type Fully published paper
DOI 10.1016/j.jbankfin.2010.06.005
ISSN 0378-4266
1872-6372
0169-6939
Editor Fariborz Moshirian
I. Mathur
Volume 35
Issue 3
Start page 670
End page 680
Total pages 11
Collection year 2011
Language eng
Formatted Abstract/Summary
There is a large body of literature examining the association between stock characteristics and the cross-section of stock returns in international markets. Recently, Cooper et al. (2008) reported a strong association between total asset growth and stock returns in the US. In this paper, we show that an asset-growth effect also exists in the Australian equity market. Of particular interest, it is present amongst the largest Australian stocks. Over the 1983–2007 period, an equally-weighted portfolio of low-growth Big stocks outperforms a portfolio of high-growth Big stocks by an average 1% per month, equating to nearly 13% per annum. At an individual stock level of analysis, the asset-growth effect remains even after controlling for other variables whose association with the cross-section of returns is well known. Finally, we explicitly test whether asset growth is a priced risk factor using the common two-stage cross-sectional regression methodology. We find no evidence to support a risk-based explanation, thereby lending credence to Cooper et al.’s (2008) suggestion that the asset-growth effect is attributable to mispricing.
© 2010 Elsevier B.V. All rights reserved.
Keyword Asset growth
Risk factors
Mispricing
Cross-sectional returns
Asset pricing
Q-Index Code C1
Q-Index Status Confirmed Code
Institutional Status UQ
Additional Notes Presented during Session 4 "Asset Pricing & Capital Markets". Discussant: Suzana Osman, Felda Global Ventures Holdings Sdn Bhd. Available online 19 June 2010. Published March 2011. - Can not find any info to link this paper with this conference. ( IMU)dc

Document type: Conference Paper
Collections: Official 2011 Collection
UQ Business School Publications
 
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Created: Fri, 25 Feb 2011, 02:28:51 EST by Karen Morgan on behalf of UQ Business School