Earning-to-Price, Dividend-to-Price, Firm Growth and Stock Returns

Cooper, Gulen and Schill (2005) examine the cross-sectional relation between firm asset growth and subsequentstock returns over the period 1963-2003. They conclude that sorting US stocks on previous year asset growthrates is superior over other determinants of cross-sectional stock returns, such as: book-to-market, firmcapitalization, momentum, amongst others.In this paper, I use the one-factor and the multi-factor models to investigate the ability of earnings-to-price,dividend-to-price, previous year asset growth rates, and retained-earnings-to-total-asset to explain the crosssectionalstock returns over the period 1980-2000. Inconsistent with Cooper et al. (2005), I conclude that sortingJordanian firms on previous year asset growth rates is not superior over earnings-to-price and dividend-to-price.Overall, the dividend-to-price strategy appears to be the best strategy that helps in predicting the cross-section ofJordanian stock returns