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Introduction to Company Growth Prospects
Unfortunately, our understanding of firm growth has not kept up with our capacity to generate theory and gather data in many areas of finance. Current finance research on company growth prospects presents strong evidence on the importance of company growth rates in explaining cross-sectional differences in stock returns. However, current finance research documents only a limited set of predictions by which the stock market would rationally evaluate the importance of striking differences in company growth prospects. A thorough theory of company growth prospects should incorporate a deeper understanding of three fundamental questions