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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.

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

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.

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

The purpose of the paper is to investigate the relation between the value/growth anomaly and the external financing anomaly by considering an expanded value/growth indicator: free cash flow yield (free cash flows scaled by price).

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

In line with the literature on contrarian portfolios, this paper finds that firms with low (high) free cash flow yield are experiencing low (high) returns. However, only when an investor buys (sells) stocks of firms with high (low) free cash flow yield that distribute (raise) capital, his zero‐cost portfolio is significant. These findings are robust, irrespective of the financing vehicle (equity or debt). Overall, their evidence suggests that distinctions between the value/growth anomaly and the external financing anomaly partially disappear, if one is willing to employ free cash flow yield as a proxy of the former anomaly.

The paper enhances one's understanding of the relation between asset pricing anomalies.

The purpose of this paper is to examine the informational content of retained and distributed earnings for future profitability and stock returns.

The paper utilizes firm‐level cross‐sectional persistent regressions, Mishkin's econometric framework and portfolio‐level analysis.

The paper shows that investors act as if the components of retained earnings (current operating accruals, non‐current operating accruals and retained cash flows) have similar implications for future profitability, leading to an overvaluation of their differential persistence. It also appears that while they cannot distinguish between the distinct properties of distributed earnings, they correctly anticipate the persistence of net cash distributions to debt holders (net debt repayment) but underestimate the persistence of net cash distributions to equity holders (dividends minus net stock issues). Overall, the findings of the paper suggest that the accrual anomaly documented in the accounting literature and the anomaly on net stock issues documented in the finance literature could be a subset of a larger anomaly on retained earnings.

The paper enhances one's understanding of the conflicting market's reaction to the accrual and cash flow component of earnings.