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What explains the investment growth anomaly?

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  • Prombutr, Wikrom
  • Phengpis, Chanwit
  • Zhang, Ying

Abstract

We examine if an existing asset pricing model in an unconditional or conditional setting can explain the investment growth anomaly, as represented by higher returns on stocks of the firms with lower growth in capital expenditures. Our results indicate that the conditional Fama–French 3-factor model that allows factor loadings to be time-varying and further linked to firm-level characteristics and the business cycle can explain the anomaly.

Suggested Citation

  • Prombutr, Wikrom & Phengpis, Chanwit & Zhang, Ying, 2012. "What explains the investment growth anomaly?," Journal of Banking & Finance, Elsevier, vol. 36(9), pages 2532-2542.
    • Handle: RePEc:eee:jbfina:v:36:y:2012:i:9:p:2532-2542
    DOI: 10.1016/j.jbankfin.2012.05.010
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    References listed on IDEAS

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    Cited by:

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    3. Stotz, Olaf, 2018. "A labor news hedge portfolio and the cross-section of expected stock returns," Journal of Empirical Finance, Elsevier, vol. 48(C), pages 123-139.
    4. Huang, Lin & Wang, Zijun, 2014. "Is the investment factor a proxy for time-varying investment opportunities? The US and international evidence," Journal of Banking & Finance, Elsevier, vol. 44(C), pages 219-232.

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    More about this item

    Keywords

    Investment growth; Risk; Characteristic; Conditional asset pricing model;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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