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

Author

Listed:
  • 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.

Suggested Citation

  • Marcelo Bianconi & Joe A. Yoshino, 2012. "Worldwide Commodities Sector Market-To-Book and Return on Equity Valuation," Discussion Papers Series, Department of Economics, Tufts University 0772, Department of Economics, Tufts University.
  • Handle: RePEc:tuf:tuftec:0772
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    File URL: http://ase.tufts.edu/econ/research/documents/2012/bianconiWorldwideCommodities.pdf
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    References listed on IDEAS

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    1. 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 1739-1764, December.
    2. Len Umantsev & Victor Chernozhukov, 2001. "Conditional value-at-risk: Aspects of modeling and estimation," Empirical Economics, Springer, vol. 26(1), pages 271-292.
    3. John Y. Campbell & Tuomo Vuolteenaho, 2004. "Bad Beta, Good Beta," American Economic Review, American Economic Association, vol. 94(5), pages 1249-1275, December.
    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. 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 131-155, March.
    6. Lu Zhang, 2005. "The Value Premium," Journal of Finance, American Finance Association, vol. 60(1), pages 67-103, February.
    7. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
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    More about this item

    Keywords

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

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • L70 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - General

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