TY - JOUR
T1 - Corporate financing activities, fundamentals to price ratios and the cross section of stock returns
AU - Papanastasopoulos, Georgios
AU - Thomakos, Dimitrios
AU - Wang, Tao
PY - 2013
Y1 - 2013
N2 - Purpose: The purpose of the paper is to investigate the relation between the value/growth anomaly and the external financing anomaly by considering an expanded value/growth indicator: free cash flow yield (free cash flows scaled by price). Design/methodology/approach: The paper utilizes portfolio-level tests and cross-sectional regressions. Findings: In line with the literature on contrarian portfolios, this paper finds that firms with low (high) free cash flow yield are experiencing low (high) returns. However, only when an investor buys (sells) stocks of firms with high (low) free cash flow yield that distribute (raise) capital, his zero-cost portfolio is significant. These findings are robust, irrespective of the financing vehicle (equity or debt). Overall, their evidence suggests that distinctions between the value/growth anomaly and the external financing anomaly partially disappear, if one is willing to employ free cash flow yield as a proxy of the former anomaly. Originality/value: The paper enhances one's understanding of the relation between asset pricing anomalies.
AB - Purpose: The purpose of the paper is to investigate the relation between the value/growth anomaly and the external financing anomaly by considering an expanded value/growth indicator: free cash flow yield (free cash flows scaled by price). Design/methodology/approach: The paper utilizes portfolio-level tests and cross-sectional regressions. Findings: In line with the literature on contrarian portfolios, this paper finds that firms with low (high) free cash flow yield are experiencing low (high) returns. However, only when an investor buys (sells) stocks of firms with high (low) free cash flow yield that distribute (raise) capital, his zero-cost portfolio is significant. These findings are robust, irrespective of the financing vehicle (equity or debt). Overall, their evidence suggests that distinctions between the value/growth anomaly and the external financing anomaly partially disappear, if one is willing to employ free cash flow yield as a proxy of the former anomaly. Originality/value: The paper enhances one's understanding of the relation between asset pricing anomalies.
KW - Cash flow
KW - External financing activities
KW - Free cash flow yield
KW - Stock returns
UR - http://www.scopus.com/inward/record.url?scp=84883128227&partnerID=8YFLogxK
U2 - 10.1108/JES-08-2011-0097
DO - 10.1108/JES-08-2011-0097
M3 - Article
AN - SCOPUS:84883128227
SN - 0144-3585
VL - 40
SP - 493
EP - 514
JO - Journal of Economic Studies
JF - Journal of Economic Studies
IS - 4
ER -