Cash, investments and asset returns |
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| Authors: | Dayong Huang Fang Wang |
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| Institution: | aDepartment of Accounting and Finance, Bryan School of Business and Economics, UNC Greensboro, Greensboro, NC 27402, United States;bDepartment of Finance and OSC, College of Business, Central Washington University, Ellensburg, WA 98926, United States |
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| Abstract: | We use an investment-based asset pricing model to examine the effect of firms’ investments relative to cash holdings on stock returns, assuming holding cash lowers transaction costs. We find that mimicking portfolios based on investments relative to non-cash capital and based on investments relative to cash capital are priced for various testing portfolios. On average, momentum stocks and growth stocks are more sensitive to the factor constructed using investment relative to cash. |
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| Keywords: | Investments Asset pricing Cash |
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