Firms that substantially increase capital investments subsequently achieve negative benchmark-adjusted returns. The negative abnormal capital investment/return relation is shown to be stronger for firms that have greater investment discretion, i.e., firms with higher cash flows and lower debt...

Based on U.S. stock returns from 1973 to 2015, this study found that the asset growth anomaly does not seem to be pervasive and investable. The trading strategy is robust only among a tiny portion of the equity market in terms of both number of stocks and capitalization. In addition to...

This study comprehensively reexamines the debate over behavioral and rational explanations for the investment effect in an updated sample. We closely follow the previous literature and provide several differences. All our tests include five prominent measures of corporate investment and...

This study provides novel evidence that cash flow news quantitatively explains the investment effect in the cross-section of stock returns. The negative return predictability of asset growth, investment growth, and accruals is evident only through the cash flow news component of returns. The...

Firms that substantially increase capital investments subsequently achieve negative benchmark-adjusted returns. The negative abnormal capital investment/return relation is shown to be stronger for firms that have greater investment discretion, i.e., firms with higher cash flows and lower debt...

To maximize firm value managers must efficiently invest new capital. This paper examines whether analyst coverage impacts a firm's investment efficiency. Using broker mergers and closures as exogenous shocks to the number of analysts covering a firm we find that firm investment efficiency...