Asset Growth and the Cross Section of Stock Returns: Evidence from Greek Listed Firms
Management Decision, Vol. 55, pp. 826 – 841, 2017
Posted: 5 Apr 2017 Last revised: 29 May 2017
Date Written: April 4, 2017
Abstract
This paper examines whether firm-level asset investment effects in returns found for U.S. firms occur within the Greek stock market. We find that growth in total assets is strongly negatively related to future stock returns of Greek firms. In fact, the relation remains statistically significant, even when we control for other strong predictors of future returns (i.e., market capitalization and book-to-market ratio). Furthermore, we find that a hedge trading strategy on asset growth rate consisting of a long (short) position in firms with low (high) balance sheet growth generates positive returns, confirming that investment growth has significant predictive power for future returns of Greek listed firms.
Keywords: asset growth, stock returns, Greek stock market
JEL Classification: G10, M4
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