scholarly journals Valuation Ratios As Stock Market Predictors

2011 ◽  
Vol 19 (3) ◽  
Author(s):  
Hassan Shirvani ◽  
Barry Wilbratte
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Efficient Markets ◽  
Dividend Yield ◽  
Font Size ◽  
Future Earnings ◽  
Causality Tests ◽  
Efficient Markets Hypothesis ◽  
Valuation Ratios

<p class="MsoBlockText" style="margin: 0in 0.5in 0pt;"><span style="font-style: normal;"><span style="font-size: x-small;"><span style="font-family: Times New Roman;">Using bivariate causality tests, this paper examines price-earnings (PE) and dividend yield (DY) ratios and finds that they do not predict future stock returns but that they do predict future earnings and dividends, lending support to the efficient markets hypothesis.<span style="mso-spacerun: yes;">&nbsp; </span>(JEL: G12, G14)</span></span></span></p>

scholarly journals A note on value investing in the UAE stock market

2019 ◽  
Vol 1 (2) ◽  
pp. 33-38
Author(s):  
Mateusz Mikutowski ◽  
George D. Kambouris ◽  
Adam Zaremba
Keyword(s):  
Stock Market ◽  
Financial Markets ◽  
United Arab Emirates ◽  
Stock Markets ◽  
Dividend Yield ◽  
Value Investing ◽  
Value Effect ◽  
Stock Picking ◽  
Valuation Ratios

Value investing is one of the most popular stock-picking strategies employed in financial markets. We investigate its effectiveness in the United Arab Emirates. We examine the performance of 124 firms in the period from January 2004 to March 2019. We analyze portfolios from one-way sorts on several well-known valuation ratios: earnings-to-price, book-to-market, EBITDA-to-EV, and dividend yield. Our results demonstrate a powerful value effect in the UAE stock markets. The long-short strategies based on valuation ratios display high raw and risk-adjusted returns. Our results are robust to many considerations.

scholarly journals Exploring frequency of price overreactions in the Ukrainian stock market

2018 ◽  
Vol 15 (3) ◽  
pp. 157-168 ◽  
Author(s):  
Alex Plastun ◽  
Inna Makarenko ◽  
Lyudmila Khomutenko ◽  
Yanina Belinska ◽  
Maryna Domashenko
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Statistical Tests ◽  
Trading Strategies ◽  
Market Prices ◽  
Price Prediction ◽  
Crisis Events ◽  
Augmented Dickey Fuller ◽  
Causality Tests ◽  
Static Approach

This paper explores the frequency of price overreactions in the Ukrainian stock market by focusing on the PFTS Index over the period 2006–2017 and UX index over the period 2008–2017, as well as some “blue chips” (BAVL, UNAF, MSICH, CEEN) for the period of 2013–2015. Using static approach to detect overreactions, a number of hypotheses are tested: the frequency of price overreactions is informative about crisis events in the economy (H1), can be used for price prediction purposes (H2), and exhibits seasonality (H3). To do this, various statistical tests (both parametric and non-parametric), including correlation analysis, augmented Dickey-Fuller tests (ADF), Granger causality tests, and regression analysis with dummy variables, are carried out. Hypotheses H1 and H2 are confirmed: frequency of price overreactions can be used as a crisis predictor (a sharp increase in the number of overreactions is associated with a crisis period) and could be used to predict stock returns. No seasonality in the overreactions frequency is found. Implications of this research include crisis prediction and stock market prices forecasting and can be used for designing trading strategies.

Scoring at Halftime

2014 ◽  
Author(s):  
Ignacio Palacios-Huerta
Keyword(s):  
Stock Market ◽  
Stock Prices ◽  
Efficient Markets ◽  
Efficient Markets Hypothesis ◽  
Influential Theory

This chapter is concerned with the idea of scoring at halftime but with a more scientific perspective. It suggests that what happens at halftime in some soccer games scores big in terms of allowing us to test an influential theory in economics: the efficient-markets hypothesis. The theory posits that the stock market processes information so completely and quickly that any relevant news would be incorporated fully into the stock's price before anyone had the chance to act on it. Simply put, unless one knew information that others did not know, no stock should be a better buy than any other. If the theory is correct—that is, if observed changes in stock prices are unpredictable—there is not much we can do to gain an advantage over other traders, except perhaps to try to identify the news that causes stock prices to rise and fall and to understand the size of any likely price jump.

scholarly journals Efficient Markets Hypothesis in the time of COVID-19.

2021 ◽  
Vol 13 (1) ◽  
pp. 45-63
Author(s):  
Evangelos Vasileiou
Keyword(s):  
Stock Market ◽  
Efficient Markets ◽  
Rational Behavior ◽  
Pricing Model ◽  
Asset Pricing Model ◽  
The Us ◽  
The World ◽  
Efficient Markets Hypothesis ◽  
Available Information ◽  
Constant Growth

This paper examines how the largest stock market of the world, the U.S., and particularly the S&P500 index, reacted during the COVID-19 outbreak (02.01.2020-30.04.2020). Using simple financial and corporate analysis (adopting Constant Growth Model) procedures for our theoretical framework, we juxtapose the released news with the respective market performance in order to examine if the stock market always incorporated the available information in time. We show that the market in some sub-periods was not moving as it was expected, and the runs-test statistically confirmed our assumptions that the US stock market was not efficient during the COVID-19 outbreak. We find that in some cases the market does not incorporate the news instantly, is irrational, and non-sensible. All these make the market’s behavior unpredictable for a rational asset pricing model because as this paper shows even the simplest financial theories could explain rational behavior, but the market presented a different performance.   

scholarly journals Earnings Management Effect In Different Stock Market Cycles

2011 ◽  
Vol 7 (8) ◽  
Author(s):  
Alireza Daneshfar ◽  
Daniel Zeghal ◽  
Mohammad J. Saei
Keyword(s):  
Stock Market ◽  
Earnings Management ◽  
Stock Returns ◽  
Stock Prices ◽  
Discretionary Accruals ◽  
Test Results ◽  
Font Size ◽  
True Nature ◽  
Abnormal Stock Returns ◽  
Management Effect

<p class="MsoNormal" style="text-align: justify; margin: 0in 0.5in 0pt;"><span style="font-size: 10pt;"><span style="font-family: Times New Roman;">This study examines the association between stock prices and discretionary accruals in different stock market cycles. The study presents evidence for a discrepancy in prior research and shows that investors are able to identify earnings management only in some cases. We argue that investors&rsquo; reaction to the true nature of EPS varies in different market cycles. We suggests that investors pay less attention to the nature of EPS changes in an optimistic cycles, and are more critical in neutral or pessimistic cycles. Therefore, investors are more likely to detect and count for any earnings management in the neutral or pessimistic cycle than in the optimistic cycle. The test results indicated that the association between discretionary accruals and abnormal stock returns were insignificant in the neutral market cycle, significant and positive in the optimistic cycle and significant and negative in the pessimistic cycle. These findings indicate that investors tend to ignore the income-increasing effect of discretionary accruals on EPS changes in an optimistic market. The findings suggest that researchers investigating the association between stock prices and earnings management should control for the type of the market cycle from which their samples are drawn. </span></span></p>

Predicting short-to-medium horizon returns

2021 ◽  
pp. 251-272
Author(s):  
Jesper Rangvid
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Stock Return ◽  
Return Predictability ◽  
Yield Spread ◽  
Dividend Yield ◽  
Important Lesson ◽  
Stock Return Predictability ◽  
Long Run ◽  
Short Run

This chapter lays out what we know about stock return predictability on the short-to-medium horizon. It recognizes that most of the fluctuations in the stock market are unpredictable, but characterizes those that are. Another important lesson of this chapter is that stock markets are very volatile in the short run but appears to be less so in the long run. Paradoxically, this implies that it looks as if we can say a little more about the future movements in the stock market when dealing with the longer run (several years). From today until tomorrow, or next week, we can say very little. The chapter illustrates how stock returns are somewhat predictable by indicators such as the yield spread and the dividend yield.

Discussion: “Earnings and Risk Changes around Private Placements of Equity”

1998 ◽  
Vol 13 (3) ◽  
pp. 375-376
Author(s):  
Prem C. Jain
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Market Reaction ◽  
Publicly Traded ◽  
Future Earnings ◽  
Stock Market Reaction ◽  
Rational Explanation ◽  
Private Placements ◽  
Publicly Traded Firms

Hertzel and Rees provide a rational explanation for a positive stock market reaction to the announcements of private sales of common equity by publicly traded firms. While previous research by Wruck (1989) and Hertzel and Smith (1993) focused on studying returns to equity holders, Hertzel and Rees focus on examining why the stock returns around the announcements are significantly positive. The authors examine two potential explanations: a change in risk and a change in future earnings. Their empirical findings are consistent with a change in earnings explanation but not with a change in risk explanation.

scholarly journals The Impact Of Weekly Money Supply Announcements ON Stock Market Returns: A Multiprocess Mixture Model Approach

2011 ◽  
Vol 9 (3) ◽  
pp. 100
Author(s):  
James P. LeSage ◽  
Andrew Solocha
Keyword(s):  
Stock Market ◽  
Money Supply ◽  
Mixture Model ◽  
The United States ◽  
Multiple Models ◽  
Efficient Markets ◽  
Market Returns ◽  
Stock Market Returns ◽  
Efficient Markets Hypothesis ◽  
The Impact

This study provides evidence concerning the impact of anticipated and unanticipated components of the weekly money supply announcements on stock market returns in the United States and Canada on the date after the announcement. The innovative aspect of this study is the use of a multiprocess mixture model recently proposed by Gordon and Smith (1990) for modeling time series that are subject to several forms of potential discontinuous change and outliers. The technique involves running multiple models in parallel with recursive Bayesian updating procedures which extend the standard Kalman filter. The results provide strong evidence in favor of the efficient markets hypothesis that only the unanticipated component of the money supply announcement influences the stock market returns in both the United States and Canada.The use of OLS estimated in the present study produces results which suggest that both anticipated and unanticipated components of the money supply announcement exert a statistically significant influence on stock market returns in both countries. In contract, the multiprocess mixture model estimation method produces results which support the efficient markets hypothesis. The difference in findings between OLS and multiprocess estimation methods is attributed to the ability of the multiprocess techniques to model discontinuous structural shifts in the parameters and accommodate outliers in the stock return-weekly money relationship. The multiprocess mixture method provides evidence that numerous discontinuities and outliers exist in the stock market returns-weekly money relation and produces posterior probabilities for the multiple models running in parallel. These probabilities suggest that the OLS model has low posterior probability relative to the structural shift and outlier models which suggest poor inferences regarding the significance of anticipated and unanticipated money arise from the use of OLS estimation techniques.

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