Style Investing Using Asset Growth

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Saranon Umchumrit
Rojana Thammajinda
Santi Kiranand


The objective of this study is to investigate the ‘Style Investing’ that used the asset growth (AG) as a deciding factor and the market value of common stocks (Size) to create a 5x5 AG-Size style portfolios.  Later, the researchers used the past 6 and 12 month average return of 5x5 AG-Size style portfolios to predict the future return of individual stocks inside that portfolios, and then applied this relationship to the momentum strategy to measure how much the benefits that investors can earn.

The result shows that the past 6 and 12 month average return of 5x5 AG-Size style portfolios are jointly predicting the future 6 and 12 month individual stock returns significantly with a negative relationship, while the explanatory power of the past average return of Size-BM style portfolios totally disappears.

Since the relationship between the past average return of AG-Size style portfolios and the future return of individual stocks are in the opposite direction, the momentum profit cannot be generated based on these assumptions. However, investors can use the contrarian strategy (buy loser and sell winner portfolio) to generate significantly raw returns up to 31% in the 12 month holding periods.


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