Does systematic distress risk drive the investment growth anomaly?

摘要

Expanding on rational Q theory, this study demonstrates that less exposure to systematic distress risk partially explains the phenomenon of investment growth anomalies, wherein equities of firms with greater growth in capital investment display lower stock returns. Using the default yield spread between BAA- and AAA-rated corporate bonds as a proxy for a systematic distress risk factor driving the pricing kernel, 1 show that firms with high (low) capital investment have lower (higher) exposure to systematic distress risk and thus lower (higher) expected returns. Depending on model settings, the factor used here to measure systematic distress risk explains 30-40% of the investment growth effect. Overall, I conservatively conclude that a moderate part of investment growth anomaly can be viewed as compensation for systematic distress risk, even though many studies explain it as a result of behavioral mispricing.