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Asset growth and the cross-section of stock returns: evidence from Greek listed firms

Georgios Constantinou (Department of Business Administration, Athens University of Economics and Business, Athens, Greece)
Angeliki Karali (Department of Business Administration, Athens University of Economics and Business, Athens, Greece)
Georgios Papanastasopoulos (Department of Business Administration, University of Piraeus, Piraeus, Greece)

Management Decision

ISSN: 0025-1747

Article publication date: 19 June 2017

Abstract

Purpose

The purpose of this paper is to examine whether firm-level asset investment effects in returns found for US firms occur within the Greek stock market.

Design/methodology/approach

The paper utilizes portfolio-level tests and cross-sectional regressions.

Findings

The authors 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 the authors control for other strong predictors of future returns (i.e. market capitalization and book-to-market ratio). Furthermore, the authors 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.

Originality/value

The paper adds to the literature on the generalization of asset pricing regularities attributable to accounting figures in an emerging market.

Keywords

Acknowledgements

The authors appreciate insightful comments and suggestions by Emmanuel Dedoulis, Constantinos Caramanis and by the seminar participants at the International Academic Conference on Management, Economics and Marketing (Vienna, 2015). The usual disclaimer applies. The publication of this paper has been partly supported by the University of Piraeus Research Centre.

Citation

Constantinou, G., Karali, A. and Papanastasopoulos, G. (2017), "Asset growth and the cross-section of stock returns: evidence from Greek listed firms", Management Decision, Vol. 55 No. 5, pp. 826-841. https://doi.org/10.1108/MD-05-2016-0344

Publisher

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Emerald Publishing Limited

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