Using a measure of cashflow risk derived from analyst forecasts, I find that cashflow risk offers a partial explanation for the value – growth anomaly. In particular, the lowest asset growth portfolio has a higher earnings beta than the highest asset growth portfolio. Approximately cashflow risk measured by earnings beta carries a significant positive risk premium of 1.24% with a t-value of 3.51.
analyst earnings, earnings beta, expected cashflow, growth anomaly
MSc in Finance
Finance and Financial Management | Portfolio and Security Analysis
WARACHKA, Mitchell Craig
DOAN, Sophie Phuong Thanh.
Do Analyst Earnings Beta Explain Growth Anomaly?. (2010). Dissertations and Theses Collection (Open Access).
Available at: http://ink.library.smu.edu.sg/etd_coll/53