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Price Ratios and the Cross-section of Common Stock Returns on Bucharest Stock Exchange: Empirical Evidence

Author

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  • Tudor, Cristiana

    (International Business and Economics Department of the Academy of Economic Studies, Bucharest, Romania.)

Abstract

This paper tests the relationship between above market returns and beta, size, leverage, book-to-market equity and earning-price ratios for the Bucharest Stock Exchange common stocks. Results from cross-sectional regressions document that both book-to-market equity and earning-price ratios are important risk factors on the Romanian stock market, while, contrary to the CAPM, the relationship between stock returns and beta is insignificant, even when beta is the only explanatory variable. In addition, a portfolio selection model based on the two factors whose explanatory power on stock returns has been previously attested seems to perform well on out-ofsample data.

Suggested Citation

  • Tudor, Cristiana, 2009. "Price Ratios and the Cross-section of Common Stock Returns on Bucharest Stock Exchange: Empirical Evidence," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 6(2), pages 132-146, June.
  • Handle: RePEc:rjr:romjef:v:6:y:2009:i:2:p:132-146
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    File URL: http://www.ipe.ro/rjef/rjef2_09/rjef2_09_9.pdf
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    Cited by:

    1. Cristiana Tudor, 2011. "Changes in Stock Markets Interdependencies as a Result of the Global Financial Crisis: Empirical Investigation on the CEE Region," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 58(4), pages 525-543, December.
    2. Andrei ANGHEL & Dalina DUMITRESCU & Cristiana TUDOR, 2015. "Modeling Portfolio Returns On Bucharest Stock Exchange Using The Fama-French Multifactor Model," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 22-46, March.

    More about this item

    Keywords

    cross-sectional regressions; risk factors; portfolio selection; Bucharest Stock Exchange;

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection

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