Overreaction to growth opportunities: An explanation of the asset growth anomaly

• Published in: European financial management : the journal of the European Financial Management Association Vol. 25; no. 4; pp. 747 - 776
• Main Authors: Cai, Charlie X., Li, Peng, Zhang, Qi
• Format: Journal Article
• Language: English
• Published: Oxford Blackwell Publishing Ltd 01.09.2019
• Subjects: anomaly; asset growth; Assets; Companies; Earnings; growth opportunities; overreaction; US market

The negative relation between asset growth and subsequent stock returns is known as the asset growth anomaly. We propose that overreaction to growth opportunities is the source of the asset growth anomaly. This suggests that growth firms as opposed to mature firms, and firms with longer series of as...