What is asset growth and why does it predict returns?

Asset growth = (Assets_t - Assets_{t-1}) / Assets_{t-1}. Firms that grow assets aggressively earn lower future returns. This is consistent with overinvestment or discount rate explanations.

How does CMA relate to the q-factor I/A?

Both capture the investment dimension. CMA uses change in total assets (investment-to-assets). I/A in the q-model uses investment-to-assets ratio. They are highly correlated but not identical.

Investment Premium CMA Factor Return Calculator

Compute the CMA (Conservative Minus Aggressive) investment factor. Long low-investment (conservative) stocks, short high-investment (aggressive) stocks. Low investment predicts high returns.

Principal ($)

Annual Rate (%)

Years

Compounding / Year

$ Finance Disclaimer: These calculators are for educational and illustrative purposes only. Results do not constitute financial advice. Consult a licensed financial advisor before making investment or borrowing decisions.

How to Use

Enter the values for the scenario you are assessing. Compute the CMA (Conservative Minus Aggressive) investment factor. Long low-investment (conservative) stocks, short high-investment (aggressive) stocks. Low investment predicts high returns. Use the investment premium cma result to inform your calculation.

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Frequently Asked Questions

What is asset growth and why does it predict returns?

How does CMA relate to the q-factor I/A?