| dc.description.abstract | This thesis investigates whether there is a cash conversion cycle (CCC) effect in the
industry component of stock returns. Using a panel of U.S. stock returns from July
1976 to December 2015, we find that a zero-investment portfolio with a long position
in the lowest CCC decile and a short position in the highest CCC decile earns annual
abnormal returns of 4%–7%. As the CCC varies considerably between industries, we check
whether this portfolio systematically loads on specific industries. However, by constructing
industry strategies that buy industries with low average CCCs and sell industries with
high average CCCs instead of individual stocks, we do not find evidence of an industry
CCC effect. As the CCC also varies considerably within industries, the portfolio of the
strategy that buys and sells individual stocks does in fact appear to be well-diversified.
The CCC effect therefore seems to be driven by individual stocks, but the underlying
driver of this remains a puzzle.
Keywords – Cash conversion cycle, Asset pricing, Industry risk | en_US |
