ABSTRACT
This study examines the asset growth anomaly in the presence of different macroeconomic states. The results show that the asset growth effect is strongly associated with macroeconomic conditions. When the economy is quiet, the spread between low and high investment firms is small and insignificant. In times of economic stress, the spread is economically large and statistically significant. The results support risk-based explanations for the asset growth effect in line with q-theory.
Disclosure statement
No potential conflict of interest was reported by the author.
Notes
1 The link between RD and macroeconomic states has been established in Gomes, Kogan, and Zhang (Citation2003) and Zhang (Citation2005), among others.
2 The advantage of using portfolios in the computation of RD instead of using the whole cross-section of stocks are detailed in Maio (Citation2013, 4).
3 in this article replicates Figure 1, Panel A, in Maio (Citation2013).