Predicting stock returns from the pricing and mispricing of accounting fundamentals

Christian Walkshäusl

The Quarterly Review of Economics and Finance, 2021, vol. 81, issue C, 253-260

Abstract: This paper examines Nichols et al.’s (2017) fundamentals-based valuation model that links share prices to accounting fundamentals in European equity markets. The model explains, on average, 69 % of the cross-sectional share price variation among European firms. Deviations of share prices from the model’s fundamental value estimates hold unique information about subsequent stock returns that goes beyond established determinants of the cross-section. Firms identified as undervalued outperform firms perceived as overvalued by more than 0.54 % per month after controlling for firm size, book-to-market, operating profitability, investment, and momentum. Hence, the market seems to incorporate fundamental information only gradually.

Keywords: Return predictability; Fundamental analysis; Mispricing; Stock returns; European markets (search for similar items in EconPapers)
JEL-codes: G11 G12 G15 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1062976921001113
Full text for ScienceDirect subscribers only

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:eee:quaeco:v:81:y:2021:i:c:p:253-260

DOI: 10.1016/j.qref.2021.06.011

Access Statistics for this article

The Quarterly Review of Economics and Finance is currently edited by R. J. Arnould and J. E. Finnerty

More articles in The Quarterly Review of Economics and Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().