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Cointegration Analysis among the Variables of the Ohlson Model for Brazilian Companies


  • Julio Pereira de Araujo
  • Marcos Roberto Gois de Oliveira Macedo


We examine whether there is a long-term equilibrium relation between the companies market value and the variables accounting book value and abnormal earnings based on the Ohlson model (1995) using a cointegration approach. Our panel cointegration analysis indicates that the variables cointegrate when using the whole sample, the most liquid companies group and for all sectors in at least one of the tests performed with exception of the Telecommunications sector, which presented no cointegration in both tests. The time series cointegration results have shown that, except for one company, for all the remaining the variables cointegrated. Therefore, the Ohlson Model (1995) is relevant for the evaluation of Brazilian listed companies in a long-term equilibrium. In addition, we provide evidence that abnormal earnings have limited explanatory power compared to book value.

Suggested Citation

  • Julio Pereira de Araujo & Marcos Roberto Gois de Oliveira Macedo, 2018. "Cointegration Analysis among the Variables of the Ohlson Model for Brazilian Companies," Applied Finance and Accounting, Redfame publishing, vol. 4(1), pages 122-145, February.
  • Handle: RePEc:rfa:afajnl:v:4:y:2018:i:1:p:122-145

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    References listed on IDEAS

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    6. Gulhan SUADIYE, 2012. "Value Relevance of Book Value & Earnings Under the Local GAAP and IFRS: Evidence from Turkey," Ege Academic Review, Ege University Faculty of Economics and Administrative Sciences, vol. 12(3), pages 301-310.
    7. Cardoso, Leonardo Chaves Borges & Bittencourt, Maurício Vaz Lobo, 2013. "Mensuração das Elasticidades-preço da Demanda, Cruzada e Renda no Mercado de Etanol Brasileiro: um estudo usando painéis cointegrados," Brazilian Journal of Rural Economy and Sociology (Revista de Economia e Sociologia Rural-RESR), Sociedade Brasileira de Economia e Sociologia Rural, vol. 51(4), pages 1-20, December.
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    More about this item


    Ohlson model; panel cointegration; time series cointegration;

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General


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