The Journal of Finance publishes leading research across all the major fields of finance. It is one of the most widely cited journals in academic finance, and in all of economics. Each of the six issues per year reaches over 8,000 academics, finance professionals, libraries, and government and financial institutions around the world. The journal is the official publication of The American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics.
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Asset Growth and the Cross‐Section of Stock Returns
Published: 07/19/2008 | DOI: 10.1111/j.1540-6261.2008.01370.x
MICHAEL J. COOPER, HUSEYIN GULEN, MICHAEL J. SCHILL
We test for firm‐level asset investment effects in returns by examining the cross‐sectional relation between firm asset growth and subsequent stock returns. Asset growth rates are strong predictors of future abnormal returns. Asset growth retains its forecasting ability even on large capitalization stocks. When we compare asset growth rates with the previously documented determinants of the cross‐section of returns (i.e., book‐to‐market ratios, firm capitalization, lagged returns, accruals, and other growth measures), we find that a firm's annual asset growth rate emerges as an economically and statistically significant predictor of the cross‐section of U.S. stock returns.