 Stock market trading strategies based on earnings and cash flows in Finland: alternative risk-adjusting approachJuha-Pekka Kallunki Scandinavian Journal of Management, 2000, vol. 16, issue 1, 85-99 Abstract: This paper investigates whether the predictability of risk-adjusted stock returns using the ratio of earnings to stock price and the ratio of cash flow earnings to stock price disappears, when accounting-based risk measures are used for risk-adjusting purposes. The main contribution of the paper is to extend the approach suggested by Chan and Chen (1991) to other trading strategies and accounting-based risk measures. Consistent with the hypothesis developed, the empirical results indicate that earnings-to-price ratios lose their ability to predict stock returns when a firm's financial and business risks are used to measure the risk of its stock. The results also indicate that these accounting-based risk measures can weaken but not totally negate the ability of the cash-flow earnings to stock price ratio to predict risk-adjusted stock returns. Keywords: Accounting; information; Stock; market; anomalies; Systematic; risk (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:scaman:v:16:y:2000:i:1:p:85-99 Ordering information: This journal article can be ordered from Access Statistics for this article Scandinavian Journal of Management is currently edited by Janne Tienari More articles in Scandinavian Journal of Management from Elsevier |
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