scholarly journals Enterprise Multiple and Future Returns of the Brazilian Stock Market

2017 ◽  
Vol 10 (3) ◽  
pp. 431
Author(s):  
Rafael Igrejas ◽  
Raphael Braga Da Silva ◽  
Marcelo Cabus Klotzle ◽  
Antonio Carlos Figueiredo Pinto ◽  
Paulo Vitor Jordão da Gama Silva
Keyword(s):  
Risk Factors ◽  
Stock Market ◽  
Cross Section ◽  
Predictive Power ◽  
Abnormal Returns ◽  
Strong Relationship ◽  
Investment Strategy ◽  
Emerging Countries ◽  
Investment Strategies ◽  
Developed Markets

The estimation of cross-section returns for defining investment strategies based on financial multiples has been proven to be relevant following Fama and French’s (1992) research. One of the challenges for such studies is to identify the main variables that are suitable for explaining the returns in a particular context because the variables that are widely used in developed markets behave differently in emerging countries. In this study, we analyze the predictive power of the EV/EBITDA multiple in the context of the Brazilian stock market. The results show that the analyzed multiple has a strong relationship with the future returns of companies listed on the BM&F BOVESPA index between 2005 and 2013. For the period under review, the investment strategy of purchasing stocks when EV/EBITDA was low and selling stocks when EV/EBITDA was high showed abnormal returns of 15.94% per year, even after controlling for risk factors.

scholarly journals Mega-sporting events: The impact on host stock markets and investment prospects

2015 ◽  
Vol 12 (2) ◽  
pp. 222-235
Author(s):  
Sameera Mohamed ◽  
Tyron Oettlé ◽  
Sinead Stewart
Keyword(s):  
Stock Market ◽  
Abnormal Returns ◽  
Investment Strategy ◽  
Investment Strategies ◽  
Sporting Events ◽  
World Cup ◽  
Fifa World Cup ◽  
Sporting Event ◽  
Actual Event ◽  
The Impact

The success of mega-sporting events such as the Summer Olympics and the FIFA World Cup brings pride and a focus to their host nations. This paper aims to find the effects of the announcement and the actual event on the host stock market. It then recommends an investment strategy. The paper finds that the announcement of the Olympics and World Cup creates statistically significant abnormal returns and the actual sporting event has little effect on the stock market. By factoring size of the economy, it is found that smaller economies tend to have larger abnormal returns than bigger economies. We then provide recommendation on investment strategies in order to exploit the significant abnormal return on the day of the World Cup announcement

scholarly journals Testing Multi-Factor Models in ADRs: Emerging Market vs. Developed Market

2020 ◽  
Vol 5 (1) ◽  
pp. 12-21
Author(s):  
Tingting Que ◽  
Wai Yin Mok ◽  
Kit Yee Cheung
Keyword(s):  
Risk Factors ◽  
Risk Premium ◽  
Factor Model ◽  
Five Factor Model ◽  
Emerging Market ◽  
Abnormal Returns ◽  
International Market ◽  
Market Risk Premium ◽  
Developed Markets ◽  
Traditional Risk Factors

This paper tests whether the Carhart four-factor model and the Fama-French five-factor model can explain variation in returns of 1,230 ADRs originating from six developed markets and five emerging markets. We aim to compare emerging market ADRs with developed market ADRs in terms of traditional risk factors significance, model fitness and the existence of abnormal returns. Overall, we find that substantial variations exist among ADRs by their origin-of-market. First, both models show that most of the positive abnormal returns we document accrue to emerging market ADRs, mainly Chinese ADRs. Among the risk factors, market risk premium is found to be most prevalent in both emerging and developed markets. Although we find some difference in the presence of particular risk factors employed in the four-factor vs. five-factor model, overall, there are no significant differences in the explanation power between the two models. Lastly, the low R2 values imply that both models do not work very well with the international market ADRs. 

scholarly journals Misvaluation and behavioral bias in the Brazilian stock market

2019 ◽  
Vol 30 (79) ◽  
pp. 107-122
Author(s):  
José Bonifácio de Araújo Júnior ◽  
Otávio Ribeiro de Medeiros ◽  
Olavo Venturim Caldas ◽  
César Augusto Tibúrcio Silva
Keyword(s):  
Stock Market ◽  
Behavioral Finance ◽  
Time Window ◽  
Abnormal Returns ◽  
Investment Strategy ◽  
Short Term ◽  
Publicly Traded Companies ◽  
Behavioral Biases ◽  
Three Samples ◽  
Investment Portfolios

ABSTRACT The study sought to apply the model developed by Gokhale et al. (2015) to identify the existence of overreaction and behavioral biases in the Brazilian stock market and analyze its performance as an investment strategy on the São Paulo Stock, Commodities, and Futures Exchange (BM&FBOVESPA) in the short term and long term, as well as test its robustness with time window simulations. The impacts of behavioral finance on capital markets can affect economic decisions, perpetuate or increase asset pricing anomalies, and in more extreme and persistent situations contribute to the formation of bubbles that can compromise the entire financial system of a country. The study pioneers an innovative methodology in the Brazilian stock market for identifying behavioral biases and obtaining abnormal returns and higher returns than the Ibovespa. The research uses the model developed by Gokhale, Tremblay, and Tremblay (2015) in three samples with quotations data for Brazilian publicly-traded companies that compose the Ibovespa and IBrA in the period from 2005 to 2016. With the R statistical software, the Fundamental Valuation Index (FVI) was calculated for each sample share and each year. From the FVI index, the undervalued shares were identified, indicating that the sales price does not reflect their economic fundamentals, and portfolio simulations were carried out for investment over three months or the next year. The results indicate the possible existence of overreaction and behavioral biases in the Brazilian stock market, which lead to the possibility of higher abnormal returns than those of the Ibovespa. Similar to the US market, at the end of the 2006-2016 period simulated portfolios yielded more than 274%, while the Ibovespa yielded approximately 80%. The robustness tests attest to the effectiveness of the model. The various investment portfolios, simulated over different time horizons, yielded more than the Ibovespa on average. The study also confirmed the assumptions of Gokhale, Tremblay, and Tremblay (2015) regarding the model's inadequacy for short-term strategies.

Portfolio Investment in Malaysia and Saudi Arabia

2022 ◽  
pp. 155-175
Author(s):  
Fariza Hashim ◽  
Nadisah Zakaria ◽  
Abdul Rahim Abu Bakar ◽  
Kamilah Kamaludin
Keyword(s):  
Saudi Arabia ◽  
Stock Market ◽  
Emerging Markets ◽  
Financial Markets ◽  
Selection Criteria ◽  
Abnormal Returns ◽  
Emerging Countries ◽  
Portfolio Investment ◽  
Stock Selection ◽  
Portfolio Returns

Several strategies are adopted by investors in lowering the risk of investment while maximising its return. Graham's stock selection criteria are noted as one of the best strategies in selecting portfolios by investors. Although the model is universally accepted, it is less commonly practised and examined in emerging markets. Considering the growth of these emerging countries' financial markets, it is worthwhile to investigate the doctrine's effect on investment in these countries. This study endeavours to review the consequence of Graham's stock selection criteria on portfolio returns in the Malaysian and Saudi Arabian stock markets. Each country represents the fastest growing market in their region which justifies this study. The study found that the Malaysian stock market is capable of proffering abnormal returns to investors while the Saudi stock market is capable to offer abnormal returns to investors despite being an undeveloped and immature stock market. The study concludes that the model of stock selection remains beneficial and indeed valuable to regional investments.

scholarly journals The evaluation of the effectiveness of high-dividend strategies in Asia-Pacific Economic Cooperation economies

2021 ◽  
Vol 37 (1) ◽  
pp. 166-186
Author(s):  
Andrey Stolyarov ◽  
◽  
Ilya Sorokin ◽  
◽  
Keyword(s):  
Papua New Guinea ◽  
Abnormal Returns ◽  
Asia Pacific ◽  
Investment Strategies ◽  
Investment Portfolio ◽  
Market Growth ◽  
Developed Markets ◽  
Relevant Today ◽  
Cross Country ◽  
Different Levels

Investment strategies related to the use of high-dividend shares have been known for more than 30 years. Despite this, they remain relevant today. A large number of studies on this topic are devoted to studying the effectiveness of high-dividend strategies within one market, and cross-country studies evaluate a small number of markets. The aim of this paper is to evaluate the effectiveness of high-dividend strategies in the markets of all APEC economies, with the exception of Brunei and Papua New Guinea. The time horizon of the study is from 2002 to the present. We applied well-known modifications of the classic high-dividend strategy and modifications developed by the authors. We test hypotheses regarding the influence of various factors, such as the number of shares in a portfolio, the month of portfolio formation,classifying the economy as developed or developing, and the return on high-dividend portfolios. We also test the hypothesis that the significance of the high-dividend anomaly exists in various markets, but decreases over time. The results show different levels of effectiveness of high-dividend strategies and the different impact of the factors on the markets of developed and developing APEC economies. We found that high-dividend strategies are generally more effective in emerging markets, but in case of market growth, high-dividend strategies increase their abnormal returns only in developed markets. At the same time, the authors conclude that the number of shares in a high-dividend portfolio directly affects the result of its work. The results have theoretical and practical value, and can be applied in compiling a real investment portfolio.

Applying Clustering Algorithms to Construct a Stock Trend Decision Model

2013 ◽  
Vol 311 ◽  
pp. 81-86
Author(s):  
Chung Min Wu ◽  
Sheng Chun Chou ◽  
Horng Twu Liaw
Keyword(s):  
Stock Market ◽  
Stock Prices ◽  
Stock Price ◽  
Clustering Algorithms ◽  
Investment Strategy ◽  
Investment Strategies ◽  
Volume Data ◽  
Accurate Identification ◽  
Research Results ◽  
Clustering Model

The stock market is a well-developed and mature market. Nevertheless, it is not immune to international financial market changes, where volatility has reigned in recent years. Investors who misgauge stock trends can suffer dramatic losses. Accurate identification of market trends can still achieve outstanding performance and has become a major investor concern. This paper proposes a new stock price trend clustering model using a genetic algorithm to search for optimal investment strategies. Daily stock prices and trading volume data from the Taiwan stock exchange weighted index (TAIEX) was used to examine the proposed trend clustering model’s performance. The model was also compared to other popular stock market investment strategies to verify its validity. Research results confirmed that the trend clustering model correctly identified three different trends in the stock market. Furthermore, the trend investment strategy model using genetic algorithms performed better than other investment strategies, i.e. Granville’s rules for buy and hold strategies, in both bull and bear markets. Research results confirmed trend investing outperformed the other two investment strategies in return and capital distribution, both during the training period and the testing period.

Market State and Investment Strategies: Evidence from the Indian Stock Market

2018 ◽  
Vol 7 (2) ◽  
pp. 154-170
Author(s):  
Supriya Maheshwari ◽  
Raj S. Dhankar
Keyword(s):  
Stock Market ◽  
Strong Relationship ◽  
Investment Strategies ◽  
Momentum Profits ◽  
Contrarian Strategies ◽  
The Us ◽  
Market State ◽  
Excess Momentum ◽  
Indian Stock Market

This study contributes to the growing literature on momentum and overreaction effect by investigating the same within the framework of the Indian stock market. Based on the most adopted methodology that employs monthly data, the empirical results derived confirm the existence of momentum and long-term overreaction effect in the Indian stock market. The overall results from the study are consistent with DeBondt and Thaler (1985) and Jegadeesh and Titman (1993) findings for the US stock market. In addition, we tested the profitability of momentum and contrarian strategies under different market states. The results indicated a strong relationship between the state of the market and momentum profitability, wherein strong momentum profits were observed following an ‘up’ market. On the contrary, long-term contrarian strategies were found to be stronger following a ‘down’ market in the Indian stock market. The market-dependent asset pricing model failed to explain excess momentum profits in the Indian stock market. The evidence from the study provides partial support to various behavioural models to explain these effects in the Indian stock market. However, there exists a need to develop a single behavioural model that could explain these anomalies completely in the emerging markets like India.

scholarly journals Accounting Scandal Announcements: A Test Of Market Efficiency

2011 ◽  
Vol 3 (3) ◽  
Author(s):  
Dana McLeod ◽  
Judith A. Laux
Keyword(s):  
Stock Market ◽  
Empirical Test ◽  
Abnormal Returns ◽  
Investment Strategy ◽  
Font Size ◽  
Market Inefficiencies ◽  
Accounting Scandals ◽  
One Year ◽  
Return Reversals ◽  
Share Value

<p class="MsoBodyTextIndent2" style="text-align: justify; text-indent: 0in; margin: 0in 0.5in 0pt;"><span style="font-style: normal; font-size: 10pt; mso-bidi-font-size: 12.0pt; mso-bidi-font-style: italic;"><span style="font-family: Times New Roman;">This paper examines the hypothesis that the stock market overreacted to accounting scandals during 2002, resulting in extensive drops in share value followed by return reversals that reveal market inefficiencies.<span style="mso-spacerun: yes;">&nbsp; </span>Data are gathered for nine firms directly involved in an accounting scandal, as well as the major competitors of those firms.<span style="mso-spacerun: yes;">&nbsp; </span>An empirical test of returns for all thirty-three firms reveals that an investment strategy of selling short scandal firms and their competitors, followed by a contrarian investment strategy of buying those same stocks, resulted in risk-adjusted returns well above those expected for a period of one year after the scandal.<span style="mso-spacerun: yes;">&nbsp; </span>These results reveal stock market inefficiencies and a potential to realize abnormal returns by capitalizing on investor overreaction.<span style="mso-spacerun: yes;">&nbsp; </span></span></span></p>

Investments, Market Timing and Portfolio Performance across Indian Bull and Bear Markets

2017 ◽  
Vol 13 (3-4) ◽  
pp. 98-109
Author(s):  
Sunaina Kanojia ◽  
Neha Arora
Keyword(s):  
Stock Market ◽  
Market Timing ◽  
Investment Strategy ◽  
Portfolio Performance ◽  
Investment Strategies ◽  
Bear Market ◽  
Market Trends ◽  
Two Phases ◽  
The Universe

The returns generated from an investment alternative are exponentially higher when espoused with appropriate timings. This article expound on the market timing used by investors to formulate profitable investment strategies in the stock market, which requires gathering of information at both micro- and macro-levels along with market trends to make timely decisions and evaluating the universe of stocks available. The market trends are been broadly classified into bull and bear phases, which have dynamic influence on buying and selling in the stock market. Further, the study supports the retail investors’ participation in the market for long-term to generate higher returns as compared to other conventional alternatives. The study attempts to identify bull and bear market turning points using a formal turning point identification procedure and formulate a profitable investment strategy in bull or bear market phases to maximise the returns. Hence, the present study provides to understand how the two phases influence investment decisions and determine the implications of bull and bear market phases on investors’ investment strategy.

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