The role of growth in long term investment returns

Broussard, JP; Michayluk, D; Neely, WP

The role of growth in long term investment returns

Broussard, JP Michayluk, D

Neely, WP

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Publication Type:: Journal Article
Citation:: Journal of Applied Business Research, 2005, 21 (1), pp. 93 - 104
Issue Date:: 2005-12-01

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Field	Value	Language
dc.contributor.author	Broussard, JP	en_US
dc.contributor.author	Michayluk, D https://orcid.org/0000-0001-9020-0855	en_US
dc.contributor.author	Neely, WP	en_US
dc.date.issued	2005-12-01	en_US
dc.identifier.citation	Journal of Applied Business Research, 2005, 21 (1), pp. 93 - 104	en_US
dc.identifier.issn	0892-7626	en_US
dc.identifier.uri	http://hdl.handle.net/10453/12894
dc.description.abstract	Stocks with a high valuation compared to fundamental values imply a high growth rate, yet these stocks have typically under-performed in subsequent years supporting Lakonishok, Shleifer and Vishney's (1994) contrarian investment strategies. The precise definition of growth and subtle differences of measuring growth are explored in assessing the role of growth in long-term investment decisions and stock valuation. Results from a later period and with additional tests than employed by LSV indicate that growth is a primary valuation factor, and valuation measures such as E/P and B/M, are imperfect proxies for expected growth. Growth appears mean reverting, but investors do not seem able to discern changes in growth rates and this miss-specification of expected growth may help explain the superiority of value versus growth strategies. In addition, investors' naïve extrapolations of past growth provide explanatory power in future holding period returns.	en_US
dc.relation.ispartof	Journal of Applied Business Research	en_US
dc.subject.classification	Business & Management	en_US
dc.title	The role of growth in long term investment returns	en_US
dc.type	Journal Article
utslib.citation.volume	1	en_US
utslib.citation.volume	21	en_US
utslib.for	1503 Business and Management	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
pubs.organisational-group	/University of Technology Sydney/Faculty of Business/Finance Discipline
utslib.copyright.status	open_access
pubs.issue	1	en_US
pubs.publication-status	Published	en_US
pubs.volume	21	en_US

Abstract:

Stocks with a high valuation compared to fundamental values imply a high growth rate, yet these stocks have typically under-performed in subsequent years supporting Lakonishok, Shleifer and Vishney's (1994) contrarian investment strategies. The precise definition of growth and subtle differences of measuring growth are explored in assessing the role of growth in long-term investment decisions and stock valuation. Results from a later period and with additional tests than employed by LSV indicate that growth is a primary valuation factor, and valuation measures such as E/P and B/M, are imperfect proxies for expected growth. Growth appears mean reverting, but investors do not seem able to discern changes in growth rates and this miss-specification of expected growth may help explain the superiority of value versus growth strategies. In addition, investors' naïve extrapolations of past growth provide explanatory power in future holding period returns.

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http://hdl.handle.net/10453/12894