Cash, Investments and Asset Returns
Department or Administrative Unit
Finance and Supply Chain Management
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.
Huang, D. & Wang, F. (2009). Cash, investments and asset returns. Journal of Banking & Finance 33(12), 2301-2311. DOI: 10.1016/j.jbankfin.2009.06.006
Journal of Banking and Finance
Copyright © 2009 Elsevier