Aaltodoc publication archive (Aalto University institutional repository)
School of Business | Department of Finance | Finance | 2011
Thesis number: 12645
Asset growth anomaly in the UK stock market
|Title:||Asset growth anomaly in the UK stock market|
|Year:||2011 Language: eng|
|Department:||Department of Finance|
|Index terms:||rahoitus; financing; osakemarkkinat; stock markets; kasvu; growth; Iso-Britannia; United Kingdom|
» hse_ethesis_12645.pdf size:542 KB (554796)
|Key terms:||asset growth anomaly; asset pricing; total asset growth; expected stock returns|
ASSET GROWTH ANOMALY IN THE UK STOCK MARKET
PURPOSE OF THE STUDY This study examines the existence and the characteristics of the asset growth anomaly in the UK stock market. Especially I concentrate on the asset pricing impact of asset growth on cross-sectional stock returns in the stock market. This study is the first to investigate the asset growth anomaly in this scope in another major stock market, i.e. UK stock market.
DATA The sample data consists of all UK stocks listed in London stock exchange between January 1982 and June 2009. All financial companies are excluded from the sample. The market data and accounting information are collected from Thomson Reuters Datastream. The final sample consists of 3218 individual stocks.
RESULTS The results indicate a negative relation between the growth in total assets and expected stock returns in the UK stock market. However the observed impact is not as strong and persisting as the previous studies have shown it to be in the US stock market.
The portfolio sorts reveal strikingly the anomaly profits were strongest among the large companies, though the anomaly was also visible among the small companies. Only among medium sized companies the anomaly are not economically viable. The regression analysis on the individual stock level indicates that the total asset growth is significant determinant of the cross-sectional stock returns. In addition to this the results also indicate that the past performance affects the anomaly profits and the stock prices are strongly reverting among high and low asset growth companies.
KEYWORDS Asset growth anomaly, asset pricing, total asset growth, expected stock returns
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