CONCEPTUAL REVIEW OF FIRMS BUSINESS STRATEGY, FINANCIAL FLEXIBILITY AND PROFITABILITY OF STYLE INVESTING IN THE ECONOMIC ENVIRONMENT

In this study, we're looking at this as a concept somewhat familiar with the economic environment we start edges and investment styles. Therefore, we first attempt a comprehensive definition of business strategies and are flexible. While the precise definition of the relationship they have with each of our investments and the profitability of existing styles. This study examines how firms’ financial flexibility affects the profitability of three of the most commonly used style investing strategies. They are the value-growth trading strategy (going long on stocks with high Book-to- Market ratio and short on stocks with low Book-to-Market ratio), the momentum trading strategy (going long on stocks that have performed well and short on stocks that have performed poorly recently), and the accruals based trading strategy. The results suggest that the understanding of corporate investment decisions can help improve the understanding of securities markets and portfolio investment strategies. There are a few lessons that investors can learn from the findings of this thesis. Value-growth investors should focus on value and growth firms with high investment irreversibility gap. Momentum investors should pursue the trading strategy among firms with high financial constraints and during economic upturns. They could also benefit from forming their portfolio from past winners and past losers with high investment gaps. Accruals based investors would benefit from pursuing the strategy among firms with high investment and financing flexibility and during economic upturns.