ID: 4490
Authors:
Carlos Marcelo Lauretti, Eduardo Kazuo Kayo, Emerson Fernandes Marçal.
Source:
Revista Brasileira de Finanças, v. 7, n. 2, p. 215-236, April-June, 2009. 22 page(s).
Keyword:
intangibility , overreaction , pricing , returns , risk
Document type: Article (Portuguese)
Show Abstract
Academic studies have shown that returns show reversion effects, which has often been explained as market overreaction to firms past performance. Other studies have shown that future returns are positively related to book-to-market index (B/M), which has been suggested as a proxy for risk factors omitted by CAPM classic model. Both evidences have been widely used in investment strategies. More recent studies in the U.S. market showed that these observations stem from the same phenomenon: the overreaction to the intangible information, that is, information that is not present in accounting performance statements, and thus counter to the prevailing explanations in the academic environment in the last two decades. This can be illustrated by return decomposition in two tranches: one that can be explained by accounting performance, and so called tangible return, and another, orthogonal to the first and so called intangible return. It was observed that only intangible return suffers reversion effects, which demonstrates overreaction to intangible information. This research seeks if those evidences can be found in Brazilian stock market.
