Empirical evidence on capital investment. growth options, and security returns

Deskripsi

Growth in the capital expenditures conditions subsequent classification of rims to portfolios based on size and book-to-market ratios, as in the widely used Fama and French (1992, 1993) methods. Growth in capital expenditures also explains returns to portfolios and the cross section of future stock returns. These findings are consistent with recent theoretical models (e.g., Berk, Green, and Naik (1999)) in which the exercise of investment-growth options results in changes in both valuation and the expected stock returns..Printed Journal