“The Growth Premium” by Huafeng (Jason) Chen
Huafeng (Jason) Chen
University of British Columbia
Contrary to conventional wisdom, growth stocks do not have higher future cash-flow growth rates than value stocks, after accounting for the survivorship bias and the static bias. I find a growth premium empirically. That is, stocks with higher expected cash-flow growth rates have higher expected returns, after controlling for cash-flow risk. I argue that my results help understand a number of puzzling facts in the cross section of stock returns.