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Valuation of Latin-American stock prices with alternative versions of the Ohlson model: An investigation of cointegration relationships with time-series and panel-data

  • Duran-Vazquez, Rocio
  • Lorenzo-Valdes, Arturo
  • Ruiz-Porras, Antonio

We develop an investigation regarding the determinants of the stock prices in six Latin American emerging markets (Argentina, Brazil, Chile, Colombia, Mexico and Peru). We test the traditional Ohlson model and an international version of it. The international model includes the Dow Jones index as an additional explanatory variable. We use time-series and panel-data cointegration methodologies to assess the long-run relationships among the variables postulated by both models. We use quarterly data for the period 2000:01-2010:03. The results suggest that panel-data techniques may be better than time-series ones for the assessments. They support the use of the Ohlson models and, specially, the international one. The variables are significant and have the postulated signs. These results hold when the firms are considered as a whole and for the commercial and construction firms. Furthermore, the results also suggest that the Latin American asset prices are complementary to the US ones in the long run.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 32043.

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Date of creation: 04 Jul 2011
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Handle: RePEc:pra:mprapa:32043
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  1. Pär Österholm & Erik Hjalmarsson, 2007. "Testing for Cointegration Using the Johansen Methodology When Variables Are Near-Integrated," IMF Working Papers 07/141, International Monetary Fund.
  2. Kwon, Chung S. & Shin, Tai S., 1999. "Cointegration and causality between macroeconomic variables and stock market returns," Global Finance Journal, Elsevier, vol. 10(1), pages 71-81.
  3. Chen, Nai-Fu & Roll, Richard & Ross, Stephen A, 1986. "Economic Forces and the Stock Market," The Journal of Business, University of Chicago Press, vol. 59(3), pages 383-403, July.
  4. Collins, Daniel W. & Maydew, Edward L. & Weiss, Ira S., 1997. "Changes in the value-relevance of earnings and book values over the past forty years," Journal of Accounting and Economics, Elsevier, vol. 24(1), pages 39-67, December.
  5. Lorenzo Valdés Arturo & Durán Vázquez Rocío, 2010. "Ohlson model by panel cointegration with Mexican data," Contaduría y Administración:Revista Internacional, Accounting and Management: International Journal, vol. 55(3), pages 131-142, septiembr.
  6. César Medeiros Cupertino & Paulo Roberto Barbosa Lustosa, 2004. "Ohlson Model Testability:Empirical Tests Findings," Brazilian Business Review, Fucape Business School, vol. 1(2), pages 136-150, June.
  7. Michael McCrae & Henrik Nilsson, 2001. "The explanatory and predictive power of different specifications of the Ohlson (1995) valuation models," European Accounting Review, Taylor & Francis Journals, vol. 10(2), pages 315-341.
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