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Investment-related anomalies in Australia: Evidence and explanations

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  • Cao, Viet Nga
  • Gray, Philip
  • Zhong, Angel

Abstract

This paper documents the existence of five investment-related anomalies in the Australian market. Cross-sectional stock returns are negatively related to each of asset growth, net operating assets, inventory growth and investment-to-assets, and positively related to asset tangibility. While the investment-return relation is theoretically motivated by q-theory, there is only support for the q-theory explanation in relation to the investment-to-assets effect. Limits to arbitrage appear to be a factor in the asset-tangibility effect, where the mispricing can be traced to the over-pricing of stocks with high levels of goodwill.

Suggested Citation

  • Cao, Viet Nga & Gray, Philip & Zhong, Angel, 2019. "Investment-related anomalies in Australia: Evidence and explanations," International Review of Financial Analysis, Elsevier, vol. 61(C), pages 97-109.
    • Handle: RePEc:eee:finana:v:61:y:2019:i:c:p:97-109
    DOI: 10.1016/j.irfa.2018.10.007
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    8. Xiaoyue Chen & Bin Li & Andrew C. Worthington, 2022. "Economic uncertainty and Australian stock returns," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(3), pages 3441-3474, September.
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    More about this item

    Keywords

    Anomalies; Investment; q -Theory; Mispricing; Asset growth; Net operating assets; Asset tangibility;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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