Cash Flow and Discount Rate Risk in the Investment Effect: A Downside Risk Approach
Ehab Yamani and
David Rakowski ()
Additional contact information
Ehab Yamani: Tanta University, Tanta, Egypt2Accounting, Finance, and Entrepreneurship Department, Jackson State University, 1400 John R. Lynch Street, Jackson, MS 39217, USA
Quarterly Journal of Finance (QJF), 2018, vol. 08, issue 03, 1-40
We examine whether sensitivities to cash flow and discount rate risk in down markets explain the investment effect, in which low-investment stocks earn higher expected returns than high-investment stocks. We show how productivity and financing constraints asymmetrically impact the systematic risk of low-investment and high-investment firms, conditional on market state. Our evidence is consistent with both productivity constraints and financing constraints as explanations for the investment effect, but, contrary to expectations, more when prices are rising than falling.
Keywords: Investment effect; Q-theory; beta decomposition; time-varying expected returns; productivity constraints; financing constraints; downside risk (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
Access to full text is restricted to subscribers.
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:wsi:qjfxxx:v:08:y:2018:i:03:n:s2010139218500027
Ordering information: This journal article can be ordered from
Access Statistics for this article
Quarterly Journal of Finance (QJF) is currently edited by Fernando Zapatero
More articles in Quarterly Journal of Finance (QJF) from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().