We find that abnormal fourth-quarter capital expenditures are negatively correlated with future stock returns. While this evidence is linked to the asset growth factor, it cannot be entirely attributed to it. The fact that the relationship reverts with contemporaneous returns suggests that ad hoc investments may reflect changing discount rates. However, additional tests indicate that the reported effect is amplified by high payouts, low debt levels, and high idiosyncratic volatility, which is suggestive of over-investment issues. Our analysis supports the notion that firms’ investment decisions contain intricate but valuable information about stock returns.

Quarterly investment spikes, stock returns and the investment factor / Altieri, Michela; Schnitzler, Jan. - In: JOURNAL OF FINANCIAL MARKETS. - ISSN 1386-4181. - (In corso di stampa), pp. 1-17. [10.1016/j.finmar.2023.100835]

Quarterly investment spikes, stock returns and the investment factor

Michela Altieri;
In corso di stampa

Abstract

We find that abnormal fourth-quarter capital expenditures are negatively correlated with future stock returns. While this evidence is linked to the asset growth factor, it cannot be entirely attributed to it. The fact that the relationship reverts with contemporaneous returns suggests that ad hoc investments may reflect changing discount rates. However, additional tests indicate that the reported effect is amplified by high payouts, low debt levels, and high idiosyncratic volatility, which is suggestive of over-investment issues. Our analysis supports the notion that firms’ investment decisions contain intricate but valuable information about stock returns.
In corso di stampa
Investment-based asset pricing, capital expenditures, investment anomaly, agency costs
Quarterly investment spikes, stock returns and the investment factor / Altieri, Michela; Schnitzler, Jan. - In: JOURNAL OF FINANCIAL MARKETS. - ISSN 1386-4181. - (In corso di stampa), pp. 1-17. [10.1016/j.finmar.2023.100835]
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11385/227258
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