Please use this identifier to cite or link to this item: https://hdl.handle.net/20.500.14279/9702
Title: The role of growth options in explaining stock returns
Authors: Trigeorgis, Lenos 
Lambertides, Neophytos 
Major Field of Science: Social Sciences
Field Category: Economics and Business
Keywords: Asset pricing;Book-to-market;Growth options;Stock returns;Value-size effects
Issue Date: Jun-2014
Source: Journal of Financial and Quantitative Analysis, 2014, vol. 49, no. 3, pp. 749-771
Volume: 49
Issue: 3
Start page: 749
End page: 771
Journal: Journal of Financial and Quantitative Analysis 
Abstract: We extend the Fama-French (1992) model by considering growth option (as well as distress/leverage) variables in explaining the cross section of stock returns. We find that growth option variables, namely growth in capital investment and yet-unexercised growth options (GO), are significantly and negatively related to stock returns. Investors may be willing to accept lower average returns from growth stocks in exchange for a more favorable (positively skewed) risk-return profile. Book-to-market (BM) ratio seems to proxy for omitted distress/leverage variables. When these are explicitly accounted for, BMis not that significant. Our growth options variables have added explanatory power.
URI: https://hdl.handle.net/20.500.14279/9702
ISSN: 00221090
DOI: 10.1017/S0022109014000118
Rights: © Michael G. Foster School of Business
Type: Article
Affiliation : Cyprus University of Technology 
University of Cyprus 
Publication Type: Peer Reviewed
Appears in Collections:Άρθρα/Articles

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