Enterprise Multiple and Future Returns of the Brazilian Stock Market Outros Idiomas

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.
Citação ABNT:
IGREJAS, R.; SILVA, R. B.; KLOTZLE, M. C.; PINTO, A. C. F.; SILVA, P. V. J. G. Enterprise Multiple and Future Returns of the Brazilian Stock Market . Revista Brasileira de Estratégia, v. 10, n. 3, p. 431-443, 2017.
Citação APA:
Igrejas, R., Silva, R. B., Klotzle, M. C., Pinto, A. C. F., & Silva, P. V. J. G. (2017). Enterprise Multiple and Future Returns of the Brazilian Stock Market . Revista Brasileira de Estratégia, 10(3), 431-443.
Link Permanente:
Tipo de documento:
BANZ, R. W. The relationship between return and market value of common stocks. Journal of Financial Economics, 9, 3-18, 1981.

BARRY, C; GOLDREYER, E; LOCKWOOD, L; RODRIGUEZ, M. Robustness of size and value effects in emerging equity markets 1985-2000. Emerging Markets Review, 3, 1-30, 2002.

BASU, S. The relationship between earnings' yield, market value and return for NYSE common stocks: Further evidence. Journal of Financial Economics, 12, 129-156, 1983.

BLACK, F; SCHOLES, M. The Pricing of Options and Corporate Liabilities. Journal of Political Economy, 81(3), 637-654, 1973.

CAKICI, N; FABOZZI, F. J; TAN, S. Size, value, and momentum in emerging market stock returns. Emerging Markets Review, 16, 46-65, 2013.

CARHART, M. M. On Persistence in Mutual Fund Performance. Journal of Finance, 52, 57-82, 1997.

CHAN, L. K. C; HAMAO, Y; LAKONISHOK, J. Fundamentals and Stock Returns in Japan. The Journal of Finance, 46(5), 1739-1764, 1991.

CLAESSENS, S; DASGUPTA, S; GLEN, J. The cross-section of stock returns: Evidence from the emerging markets. World Bank Publications, 1995.

COCHRANE, J. H. Production-Based Asset Pricing and the Link between Stock Returns and Economic Fluctuations. The Journal of Finance, 46, 209–237, 1991.

DAMODARAN, A. Equity Risk Premiums (ERP): Determinants, Estimation and Implications The 2010 Edition. Social Science Research Network eLibrary, 2010. Disponível em: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1556382

FAMA, E. F; FRENCH, K. R. Common Risk Factors in the Returns on Stocks and Bonds. Journal of Financial Economics, 33, 3–56, 1993.

FAMA, E. F; FRENCH, K. R. The Cross-Section of Expected Stock Returns. The Journal of Finance, 47(2), 427-465, 1992.

FAMA, E; FRENCH, K. Value versus growth: the international evidence. Journal of Finance, 53(6), 1975–1999, 1998.

HART, V. D. J; SLAGTER, E; VAN DIJK, D. Stock selection strategies in emerging markets. Tinbergen Institute Discussion Paper Serie, nº TI 01-009/4, 2001. Disponível em: http://hdl.handle.net/1765/6879

HARVEY, C. R. Predictable risk and returns in emerging markets. The Review of Financial Studies, 8(3), 773-816, 1995.

KIM, M; RITTER, R. J. Valuing IPOs. Journal of Financial Economics, 53, 409–437, 1999.

KOLLER, T; GOEDHART, M; WESSELS, D. Valuation: Measuring and Managing the Value of Companies. 4 ed. Hoboken, NJ: John Wiley & Sons , INC, 2005.

LINTNER, J. The Valuation of Risk Assets and the Selection of Risky Investments in Stock Portfolios and Capital Budgets. The Review of Economics and Statistics, 47, 13-37, 1965.

LIU, L. X; WHITED, T. M; ZHANG, L. Investment-Based Expected Stock Returns. Journal of Political Economy, 117(6), 1105-1139, 2009.

LOUGHRAN, T; WELLMAN, J. W. New Evidence on the Relation between the Enterprise Multiple and Average Stock Returns. Journal of Financial and Quantitative Analysis, 46(6), 1629-1650, 2012.

PATEL, S. A. Cross-sectional variation in emerging markets equity returns January 1988– March 1997. Emerging Markets Quarterly (Spring), 2, 57–70, 1998.

ROSENBERG, B; REID, K; LANSTEIN, R. Persuasive evidence of market inefficiency. The Journal of Portfolio Manage, 11(3), 9-16, 1985.

ROUWENHORST, K. G. Local Return Factors and Turnover in Emerging Stock Markets. The Journal of Finance, 54(4), 1439-1464, 1999.

SHARPE, W. F. Capital Asset Prices: A Theory of Market Equilibrium under Conditions of Risk. The Journal of Finance, 19(3), 425-442, 1964.

SILVA, R. B. D; BRESSANE, B. P; VIOLA, A. P; KLOTZLE, M. C; PINTO, A. C. F; SOARES, T. D. L. V. A. D. M. The Breakdown of Idiosyncratic Volatility Into Expected and Unexpected Components and Its Effects on Stock Returns in Brazil. Latin American Business Review, 13(4), 311-328, 2012.

WHITE, H. A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity. Econometrica: Journal of the Econometric Society, 48, 817-838, 1980.