Estimating Stocks Return with Decomposition of the Book-to-Market Ratio: Evidences from Bovespa

Juliano Ribeiro de Almeida () and William Eid ()
Additional contact information
Juliano Ribeiro de Almeida: FGV/EAESP
William Eid: FGV/EAESP

Brazilian Review of Finance, 2010, vol. 8, issue 4, 417-441

Abstract: The book-to-market (BM) ratio differs across stocks because to differences in expected cashflows and expected returns. The central hypothesis is that the evolution of BM, in terms of past changes in price and book equity, contains information about future cashflows that can be used to improve estimates of expected returns. This article used a database of Economática to extract a sample of non-financial companies shares listed on BOVESPA and test this hypothesis. The estimated regressions were performed monthly during the period July 1996 to June 2008. Both for large and mid caps as for small caps, the results do not favor this hypothesis and show that only the most recent BM is important to predict the assets returns. Furthermore, stock issues and repurchases are also related to future cashflows and it is expected to improve estimates of expected returns. However, the results provide no evidence favoring that.

Keywords: CAPM; Book-to-market; risk; returns; pricing. (search for similar items in EconPapers)
JEL-codes: G12 G14 (search for similar items in EconPapers)
Date: 2010
References: Add references at CitEc
Citations:

Downloads: (external link)
http://bibliotecadigital.fgv.br/ojs/index.php/rbfin/article/download/2571/2128 (application/pdf)
http://bibliotecadigital.fgv.br/ojs/index.php/rbfin/article/view/2571 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:brf:journl:v:8:y:2010:i:4:p:417-441

Access Statistics for this article

Brazilian Review of Finance is currently edited by Marcio Laurini

More articles in Brazilian Review of Finance from Brazilian Society of Finance
Bibliographic data for series maintained by Marcio Laurini ().