Expected investment and the cross-section of stock returns

摘要

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. (C) 2018 Elsevier B.V. All rights reserved.