Limits-to-arbitrage, investment frictions, and the asset growth anomaly |
| |
Authors: | F.Y. Eric C. Lam |
| |
Affiliation: | a Department of Economics and Finance, College of Business, City University of Hong Kong, Kowloon, Hong Kong b Department of Finance, School of Business and Management, Hong Kong University of Science and Technology, Clear Water Bay, Kowloon, Hong Kong |
| |
Abstract: | We empirically evaluate the predictions of the mispricing hypothesis with limits-to-arbitrage suggested by Shleifer and Vishny (1997) and the q-theory with investment frictions proposed by Li and Zhang (2010) on the negative relation between asset growth and average stock returns. We conduct cross-sectional regressions of returns on asset growth on subsamples split by a given measure of limits-to-arbitrage or investment frictions. We show that: (i) proxies for limits-to-arbitrage and proxies for investment frictions are often highly correlated; (ii) the evidence based on equal-weighted returns shows significant support for both hypotheses, while the evidence from value-weighted returns is weaker; and (iii) in direct comparisons, each hypothesis is supported by a fair and similar amount of evidence. |
| |
Keywords: | G14 G31 M41 M42 |
本文献已被 ScienceDirect 等数据库收录! |
|