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Academic audit

Failedequity XS fundamental

Asset Growth Effect

The three-gate gauntlet · genuine only if it clears all three and survives adversarial refutation
Gate 1
Survivorship-free
free
clean panel
Eliminated here
Gate 2
Placebo ≥ P95
P91.5
outranked ~183 of 200 baskets
Gate 3
Cost-aware net
RF -0.28
net-negative after costs
Failed
Worst 12-month leg (RF)-0.88
−1.00 floor0
Every strategy here — winners included — loses in its worst 12 months. Depth is honest context, not the verdict.
Rejected at the luck gate — its net ranked no better than random baskets (below the P95 skill line).

The asset growth effect ranks firms by the year-over-year growth in total assets and goes long the lowest-growth companies while shorting the highest-growth ones, on the finding that firms expanding their asset base most aggressively tend to underperform afterward.

What we found

The long-minus-high-asset-growth leg has only marginal cross-sectional rank-skill: its placebo percentile came in at 91.5, so the signal is weakly distinguishable from random baskets but not convincingly so. Once realistic modelled trading costs are applied, the leg is net-negative and its worst year is a loss (worst-year RF -0.88). It does not survive costs, and we do not treat it as a usable building block.

How we tested it
2005–2026 test windowmodelled liquidity-aware costssurvivorship free
  • Tested on a survivorship-free 1077-name US common-stock panel, 2005-2026. Realistic modelled costs.
  • Placebo / robustness test: real result vs random baskets or shuffled signals (real vs the 95th percentile of random)
Source: Cooper, Gulen & Schill (2008), "Asset Growth and the Cross-Section of Stock Returns", J. Finance
Read the paper ↗
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Research, not investment advice. “Validated” factor-legs are market-neutral diversifying building blocks with a losing worst year — none is a standalone tradeable strategy. Metrics are cost-aware and modelled (not live fills); the 2005–2026 test window is out-of-sample versus the source paper. Dollar figures are not returns and are omitted by design.