Financial statement information and the prédiction of stock returns in a small capital market: the case of Belgium
AbstractThe most common definition of efficient stock markets states that in such markets prices fully reflect all available information. This obviously implies that in order for a market to be deemed (semi-strongly) efficient, it should not be possible to earn abnormal returns using trading strategies based on publicly available accounting data. However, especially since the late 1980s, a number of such trading strategies have been shown to be lucrative. In the underlying paper the profitability of two investment strategies that were originally developed on the basis of U.S. data is investigated for the Belgian stock market on the basis of accounting data for the period 1990-1998. The two replicated studies are Ou and Penman (1989) and Holthausen and Larcker (1992). With respect to On and Penman's results, we are unable to draw an unequivocal conclusion. On the one hand, we find an indication that some earnings-based variables may be predicted on the basis of financial statement data. The trading strategies building on these forecasting abilities do not, however, systematically earn abnormal returns. This is due to the fact that our proxies for unexpected earnings appear to lack value relevance. We also find that Holthausen and Lacker's s results cannot be considered valid for the Belgian stock market, simply because the LOGIT models estimated on the basis of accounting data do not produce sufficiently accurate forecasts of the signs of future abnormal returns.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by ULB -- Universite Libre de Bruxelles in its journal Brussels economic review.
Volume (Year): 45 (2002)
Issue (Month): 3 ()
Accounting; capital markets; Market efficiency; Predictability; Trading strategy; Financial statements;
Find related papers by JEL classification:
- M41 - Business Administration and Business Economics; Marketing; Accounting - - Accounting - - - Accounting
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Benoit Pauwels).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.