Expected investment growth and stock returns in an emerging market

Ozkan N.

ECONOMICS LETTERS, vol.207, 2021 (SSCI) identifier identifier

  • Publication Type: Article / Article
  • Volume: 207
  • Publication Date: 2021
  • Doi Number: 10.1016/j.econlet.2021.110008
  • Journal Indexes: Social Sciences Citation Index (SSCI), Scopus, International Bibliography of Social Sciences, Periodicals Index Online, ABI/INFORM, Business Source Elite, Business Source Premier, EconLit, Public Affairs Index, zbMATH
  • Keywords: Emerging equity returns, Expected investment growth, Fama-MacBeth, Turkey, CROSS-SECTION
  • Bursa Uludag University Affiliated: Yes


As a newly explored topic, the role of expected growth is assumed to have a positive relation with expected stock returns. The purpose of this study is to investigate whether expected investment growth is positively related to stock returns in the period of 2009-2018 in Turkey as an emerging market. For this evaluation, three proxies are calculated as 1-year-ahead expected growth, 2-years ahead expected growth, and 3-years-ahead expected growth. The results reveal that 1-year-ahead expected growth predicts the expected returns much better than the other proxies. Portfolio-level analysis supports the conclusion that investment plans for the future have a positive effect on the expected stock returns in an emerging market. Long-short spread of 1.51% occurs monthly at the 1% significance level, and the leading factor models are unable to capture the abnormal returns. (C) 2021 Elsevier B.V. All rights reserved.