Abstract
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.
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