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Worldwide Commodities Sector Market-To-Book and Return on Equity Valuation

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  • Marcelo Bianconi
  • Joe A. Yoshino

Abstract

We analyze panel data for the worldwide commodities sector using a sample of 6,323 firms from 69 countries with annual observations from 1999 to 2010. The effect of return on equity on market-to-book is time-varying and declining across the years in the sample. First, there is positive and strong persistence in the market-to-book of companies in this sector worldwide, but value stocks are more persistent thatn growth stocks in this sector. The effect of the return on equity is positive of about 0.9% on market-to-book per unit of return on equity at the 10th percentile of the market-to-book. This effect becomes negative 0.02% for growth stocks at 90th percentiles. For firms with negative profitability, the effect of return on equity on market-to-book is negative for growth stocks. The effect of the S&P500 volatility index Vix is negative, significant and large in magnitude, but declines in absolute value as the quantiles increase towards the upper 90th percentile.

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File URL: http://ase.tufts.edu/econ/research/documents/2012/bianconiWorldwideCommodities.pdf
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Bibliographic Info

Paper provided by Department of Economics, Tufts University in its series Discussion Papers Series, Department of Economics, Tufts University with number 0772.

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Date of creation: 2012
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Handle: RePEc:tuf:tuftec:0772

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Keywords: Market-to-book ratio and return on equity; quatile regression;

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  1. Lu Zhang, 2005. "The Value Premium," Journal of Finance, American Finance Association, vol. 60(1), pages 67-103, 02.
  2. John Y. Campbell & Tuomo Vuolteenaho, 2003. "Bad Beta, Good Beta," Harvard Institute of Economic Research Working Papers 2016, Harvard - Institute of Economic Research.
  3. Len Umantsev & Victor Chernozhukov, 2001. "Conditional value-at-risk: Aspects of modeling and estimation," Empirical Economics, Springer, vol. 26(1), pages 271-292.
  4. Robert F. Engle & Simone Manganelli, 1999. "CAViaR: Conditional Value at Risk by Quantile Regression," NBER Working Papers 7341, National Bureau of Economic Research, Inc.
  5. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  6. Fama, Eugene F & French, Kenneth R, 1995. " Size and Book-to-Market Factors in Earnings and Returns," Journal of Finance, American Finance Association, vol. 50(1), pages 131-55, March.
  7. Chan, Louis K C & Hamao, Yasushi & Lakonishok, Josef, 1991. " Fundamentals and Stock Returns in Japan," Journal of Finance, American Finance Association, vol. 46(5), pages 1739-64, December.
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