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Analysis of the use of a four-factor model as a tool to help manage portfolios based on the IBrX

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Author Info

  • Luiz Eduardo Carvalho Terra de Faria

    (Pontifícia Universidade Católica do Rio de Janeiro (PUC-RIO))

  • Walter Lee Ness Jr.

    (Pontifícia Universidade Católica do Rio de Janeiro (PUC-RIO))

  • Marcelo Cabus Klotzle

    (Pontifícia Universidade Católica do Rio de Janeiro (PUC-RIO))

  • Antonio Carlos Figueiredo Pinto

    (Pontifícia Universidade Católica do Rio de Janeiro (PUC-RIO))

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    Abstract

    Using the price series of the assets that compose the IBrX in the period from May 2002 to December 2007, this article examines the influence of the variables beta, market value, price-earnings ratio and book-to-market ratio on the behavior of the Brazilian stock market, comparing the results with those of other studies carried out in Brazil. On investigating the influence of beta, we sought to verify if the premises of the CAPM are valid in the model proposed. We used the SUR and TSCS techniques to estimate the influence of the variables. The results indicate the significance of price-earnings and market value, but the book-to-market ratio presented the greatest stability and was significant in all the proposed models. In relation to the CAPM, the study shows that all the variables analyzed had some degree of influence on the cross-sectional variations of the average stock returns, indicating that other factors besides beta can be associated with the behavior of the assets.

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    File URL: http://www.bbronline.com.br/public/edicoes/8_4/artigos/w91t92wo771122011174947.pdf
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    Bibliographic Info

    Article provided by Fucape Business School in its journal Brazilian Business Review.

    Volume (Year): 8 (2011)
    Issue (Month): 4 (October)
    Pages: 67-88

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    Handle: RePEc:bbz:fcpbbr:v:8:y:2011:i:4:p:67-88

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    Postal: Fucape Business School Brazilian Business Review Av. Fernando Ferrari, 1358, Boa Vista CEP 29075-505 Vitória-ES
    Phone: +55 27 4009-4423
    Fax: +55 27 4009-4422
    Web page: http://www.bbronline.com.br/
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    Related research

    Keywords: CAPM; IBrX; price-earnings ratio; market value; book-to-market ratio.;

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