Title

Cash, Investments and Asset Returns

Document Type

Article

Department or Administrative Unit

Finance and Supply Chain Management

Publication Date

12-2009

Abstract

We use an investment-based asset pricing model to examine the effect of firms’ investments relative to cash holdings on stock returns, assuming holding cash lowers transaction costs. We find that mimicking portfolios based on investments relative to non-cash capital and based on investments relative to cash capital are priced for various testing portfolios. On average, momentum stocks and growth stocks are more sensitive to the factor constructed using investment relative to cash.

Comments

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Journal

Journal of Banking and Finance

Rights

Copyright © 2009 Elsevier