Proceedings of the 2nd International Conference on Mathematical Statistics and Economic Analysis, MSEA 2023, May 26–28, 2023, Nanjing, China

Research Article

The Impact of Asset Growth on Stock Returns

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  • @INPROCEEDINGS{10.4108/eai.26-5-2023.2334276,
        author={Yifan  Wu},
        title={The Impact of Asset Growth on Stock Returns},
        proceedings={Proceedings of the 2nd International Conference on Mathematical Statistics and Economic Analysis, MSEA 2023, May 26--28, 2023, Nanjing, China},
        publisher={EAI},
        proceedings_a={MSEA},
        year={2023},
        month={7},
        keywords={asset growth rate stock return fama-french three factor model capm},
        doi={10.4108/eai.26-5-2023.2334276}
    }
    
  • Yifan Wu
    Year: 2023
    The Impact of Asset Growth on Stock Returns
    MSEA
    EAI
    DOI: 10.4108/eai.26-5-2023.2334276
Yifan Wu1,*
  • 1: University of Liverpool
*Contact email: 1925915041@qq.com

Abstract

This essay aims to investigate the connection between asset growth rate and equity returns. We find that stocks with higher asset growth rates can generate better returns. However, there is no substantial return rule for the risk-adjusted returns based on the CAPM and Fama-French (1993) three-factor model. Additionally, this asset growth rate factor is added as a new pricing element to the Fama-French three-factor model in order to examine the effectiveness of asset growth risk factors in explaining asset prices. The findings demonstrate that the risk of asset expansion has a major impact on stock re-turns. This further validates previous studies and findings and adds to the body of knowledge about asset pricing.