An Intangible-Adjusted Book-to-Market Ratio Still Predicts Stock Returns

2022 ◽  
Vol 11 ◽  
Author(s):  
Hyuna Park
Keyword(s):  
Stock Returns ◽  
Book To Market Ratio

Research of Building Intelligent Investment Decision Mode for Investment Portfolio — Using Taiwan Electronic Stock as an Example

2010 ◽  
Vol 13 (04) ◽  
pp. 621-645 ◽  
Author(s):  
Wen-Rong Jerry Ho ◽  
C. H. Liu ◽  
H. W. Chen
Keyword(s):  
Stock Returns ◽  
Stock Prices ◽  
Stock Exchange ◽  
Investment Decision ◽  
Investment Strategy ◽  
Return Rate ◽  
Selection Strategy ◽  
Stock Selection ◽  
Taiwan Stock Exchange ◽  
Book To Market Ratio

This research uses all of the listed electronic stocks in the Taiwan Stock Exchange as a sample to test the performance of the return rate of stock prices. In addition, this research compares it with the electronic stock returns. The empirical result shows that no matter which kind of stock selection strategy we choose, a majority of the return rate is higher than that of the electronics index. Evident in the results, the predicted effect of BPNN is better than that of the general average decentralized investment strategy. Furthermore, the low price-to-earning ratio and the low book-to-market ratio have a significant long-term influence.

scholarly journals Book-to-Market Ratio, return on equity and Brazilian Stock Returns

2018 ◽  
Vol 53 (3) ◽  
pp. 324-344 ◽  
Author(s):  
Rebeca Cordeiro da Cunha Araújo ◽  
Márcio André Veras Machado
Keyword(s):  
Risk Factors ◽  
Stock Returns ◽  
Capital Market ◽  
Explanatory Power ◽  
Predictor Variable ◽  
Liquidity Premium ◽  
Future Expectations ◽  
Content Type ◽  
Return On Equity ◽  
Book To Market Ratio

Purpose This study aims to analyze the influence of future expectations of the book-to-market ratio (B/M) and return on equity (ROE) in explaining the Brazilian capital market returns. Design/methodology/approach The study analyzed the explanatory power of risk-factor approach variables such as beta, size, B/M ratio, momentum and liquidity. Findings The results show that future expectations of the B/M ratio and ROE, when combined with proxies for risk factors, were able to explain part of the variations of Brazilian stock returns. With respect to risk factors approach variables, the authors verified the existence of size and B/M effects and a liquidity premium in the Brazilian capital market, during the period analyzed. Research limitations/implications This research was limited to the non-financial companies with shares traded at Brasil, Bolsa and Balcão, from January 1, 1995 to June 30, 2015. This way, the conclusions reached are limited to the sample used herein. Practical implications The evidences herein presented can also contribute to establishing investment strategies, considering that the B/M ratio may be calculated through accounting information announced by companies. Besides, using historical data enable investors, in a specific year, to calculate the predictor variables for the B/M ratio and ROE in the next year, which enhance the explanatory power of the current B/M, when combined in the form of an aggregate predictor variable for stock returns. Originality/value The main contribution of this study to the literature is to demonstrate how the expected future B/M ratio and ROE may improve the explanatory capacity of the stock return, when compared with the variables traditionally studied in the literature.

A THRESHOLD MODEL APPROACH TO ESTIMATING THE ABNORMAL STOCK RETURNS

2013 ◽  
Vol 08 (01) ◽  
pp. 1350001
Author(s):  
TERENCE TAI-LEUNG CHONG ◽  
WING HEI MAK ◽  
ISABEL KIT-MING YAN
Keyword(s):  
Stock Returns ◽  
Firm Size ◽  
Threshold Model ◽  
Empirical Studies ◽  
Abnormal Returns ◽  
Threshold Effects ◽  
Market Values ◽  
Abnormal Stock Returns ◽  
Equity Ratio ◽  
Book To Market Ratio

The classical capital asset pricing model postulates a linear relationship between stock returns and stock risks. However, a number of subsequent empirical studies have revealed some anomalies in this relationship, especially for firms with small size and high book-to-market values. A possible explanation for the anomalies is the existence of threshold effects in the proxies of stock risks. However, conventional threshold models only allow for one threshold variable, which limits their applicability in this context. In this paper, we address this issue by applying the econometric technique developed by Bai et al. (2012). We estimate the joint threshold effects of firm size and book-to-market equity ratio on the stock returns using a sample of 5,271 US firms. The test results yield clear evidence for the existence of threshold effects in both firm features. We find that abnormal returns exist when the firm size falls below 52.04 million USD and the book-to-market ratio exceeds 0.4085.

Asset growth and the cross-section of stock returns: evidence from Greek listed firms

2017 ◽  
Vol 55 (5) ◽  
pp. 826-841 ◽  
Author(s):  
Georgios Constantinou ◽  
Angeliki Karali ◽  
Georgios Papanastasopoulos
Keyword(s):  
Stock Returns ◽  
Emerging Market ◽  
Balance Sheet ◽  
Firm Level ◽  
Cross Sectional ◽  
Content Type ◽  
Listed Firms ◽  
Asset Growth ◽  
Book To Market Ratio ◽  
Investment Growth

Purpose The purpose of this paper is to examine whether firm-level asset investment effects in returns found for US firms occur within the Greek stock market. Design/methodology/approach The paper utilizes portfolio-level tests and cross-sectional regressions. Findings The authors find that growth in total assets is strongly negatively related to future stock returns of Greek firms. In fact, the relation remains statistically significant, even when the authors control for other strong predictors of future returns (i.e. market capitalization and book-to-market ratio). Furthermore, the authors find that a hedge trading strategy on asset growth rate consisting of a long (short) position in firms with low (high) balance sheet growth generates positive returns, confirming that investment growth has significant predictive power for future returns of Greek listed firms. Originality/value The paper adds to the literature on the generalization of asset pricing regularities attributable to accounting figures in an emerging market.

Stock returns, dividend yield, and book-to-market ratio

2007 ◽  
Vol 31 (2) ◽  
pp. 455-475 ◽  
Author(s):  
Xiaoquan Jiang ◽  
Bong-Soo Lee
Keyword(s):  
Stock Returns ◽  
Dividend Yield ◽  
Book To Market Ratio

scholarly journals Real Options, Idiosyncratic Skewness, and Diversification

2017 ◽  
Vol 52 (1) ◽  
pp. 215-241 ◽  
Author(s):  
Luca Del Viva ◽  
Eero Kasanen ◽  
Lenos Trigeorgis
Keyword(s):  
Real Options ◽  
Stock Returns ◽  
Real Option ◽  
Firm Level ◽  
Financial Flexibility ◽  
Growth Option ◽  
High Volatility ◽  
Book To Market Ratio ◽  
Sharpe Ratios ◽  
Mean Variance Portfolio

We show how firm-level real options lead to idiosyncratic skewness in stock returns. We then document empirically that growth option variables are positive and significant determinants of idiosyncratic skewness. The real option impact on skewness is more significant in firms with lottery-type features, small size, high volatility, distressed, low return on assets, and low book-to-market ratio. We also find that expectation on idiosyncratic skewness is associated with lower Sharpe ratios. This suggests investors are willing to sacrifice mean-variance portfolio efficiency for greater skewness deriving from real options. Furthermore, financial flexibility has a positive incremental effect, enhancing the beneficial role of asset flexibility on idiosyncratic skewness.

scholarly journals Time-Varying Risk and the Relation between Idiosyncratic Risk and Stock Return

2021 ◽  
Vol 14 (9) ◽  
pp. 432
Author(s):  
Chengbo Fu
Keyword(s):  
Stock Returns ◽  
Stock Return ◽  
Idiosyncratic Risk ◽  
Point Of View ◽  
Time Varying ◽  
Total Risk ◽  
Risk Return ◽  
Long Run ◽  
Book To Market Ratio ◽  
The 1960S

This paper studies the historical time-varying dynamics of risk for individual stocks in the U.S. market. Total risk of an individual stock is decomposed into two components, systematic risk and idiosyncratic risk, and both components are studied separately. We start from the historical trend in the magnitude of risk and then turn to the relation between idiosyncratic risk and stock returns. The result shows that both components of risk for individual stocks are changing over time. They increased from the 1960s to the 1990s/2000s and then declined until today. This paper also studies the risk-return tradeoff by investigating the relation between idiosyncratic risk and stock return in the long run. Stocks are sorted into portfolios for analysis and the whole sample period is further decomposed into decades for subgroup analysis. Multivariable regressions are used to study this relation as we control for beta, size, book-to-market ratio, momentum and liquidity. From a historical point of view, we show that the relation between idiosyncratic risk and stock return is time-varying, and it did not exist in certain decades. The results indicate that the risk-return tradeoff also varied in history.

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