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Asset Growth and Future Stock Returns: International Evidence

Author

Listed:
  • Xi Li
  • Ying Becker
  • Didier Rosenfeld

Abstract

The authors found strong return predictive power for measures related to asset growth in the MSCI World Universe. The predictive power applies to abnormal returns for up to four years after the initial measurement period, is particularly strong for two-year total asset growth rates, and is robust to size and book-to-market adjustments. It is also robust for various sample periods, various geographic regions, and both large- and small-cap stocks. We studied the return predictive power of asset growth–related measures in the MSCI World Universe, which includes all developed markets. We found a high level of return predictive power for asset growth–related measures in these markets, particularly for two-year total asset growth rates. This predictive power is robust to size and book-to-market adjustments. It is also robust for different subperiods, various geographic regions, and both large- and small-stocks. We also found that two-year total asset growth rates have the ability to generate abnormal returns for up to four years after their initial measurement period.

Suggested Citation

  • Xi Li & Ying Becker & Didier Rosenfeld, 2012. "Asset Growth and Future Stock Returns: International Evidence," Financial Analysts Journal, Taylor & Francis Journals, vol. 68(3), pages 51-62, May.
    • Handle: RePEc:taf:ufajxx:v:68:y:2012:i:3:p:51-62
    DOI: 10.2469/faj.v68.n3.4
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