Expected investment and the cross-section of stock returns

Qi Lin and Xi Lin

Economics Letters, 2018, vol. 172, issue C, 43-49

Abstract: In this paper, we show that the relation between expected investment and future stock returns (i.e., the expected investment–return relation) is negative and inconsistent with the multiperiod q theory. Further analysis reveals that the expected investment change measure of Hou et al. (2018a) is a poor proxy for future investment because of the mismatch of investment characteristics and the incorrect constraint imposed on the regression.

Keywords: Expected investment; Cross-sectional returns; Expected investment change; Multiperiod q theory (search for similar items in EconPapers)
JEL-codes: G11 G12 G17 (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:172:y:2018:i:c:p:43-49

DOI: 10.1016/j.econlet.2018.08.012

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