Value or Growth Strategy? Empirical Evidence in Brazil

Cordeiro, Rebeca Albuquerque; Machado, Márcio André Veras

doi:10.7819/rbgn.v15i46.1170

Cited by 5 publications

(3 citation statements)

References 25 publications

(38 reference statements)

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“…Our main variable, the B/M ratio, shows one of the most substantial standard deviations of the sample due to the presence of significant outliers. Therefore, the B/M mean of 1.637 is lower than the average reported by Cordeiro and Machado (2013), between 1995 and 2008, of 1.81, and agrees with the tendency that the B/M has been reducing in Brazil, with the predominance of growth companies.…”

Section: Resultssupporting

confidence: 84%

“…Second, if the duration-based explanation is a valid argument for the growth and value stocks divergence, a study conducted in Brazil will bring empirical evidence for this market, since there are mixed results related to the stock returns of growth and value firms. There is evidence of an inverted value premium: growth stocks/portfolios had 294 REGE 26,3 high returns in the years 1990, 1991(Mescolin, Braga, & Costa, 1997), in 2001and 2002(Pedreira, 2005), in 1999, 2000, 2002, 2003and 2007(Saito, Savoia, & Sousa, 2014 and in the period between 1995 and 2008 (Cordeiro & Machado, 2013).…”

Section: Introductionmentioning

confidence: 99%

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Value and growth stocks and shareholder value creation in Brazil

Vasconcelos

Martins

2019

REGE

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Purpose Investors label high (low) book-to-market (B/M) firms as value (growth) companies. The conventional wisdom supports that growth stocks grow faster than the value ones, creating greater shareholder value. The Purpose of this paper is to analyze how stocks of growth and value companies create value for their shareholders in Brazil, compared to the USA market. For this, the authors analyze three dimensions of return. Design/methodology/approach First, the authors perform portfolios to analyze the growth rates of shareholders’ return. Then, the authors perform regressions to study the explanatory power of the B/M in growth. The data come from Thomson Reuters Eikon database and the Brazilian Institute of Geography and Statistics. The authors select all non-financial firms with available data from 1997 to 2017. Findings The profitability of growth firms is higher than the value ones, in almost every year after the portfolios’ formation, with little variation. Contrary to the findings for the US market, growth companies in Brazil show higher dividend growth than value companies. Research limitations/implications It is possible that the database does not contain complete and entirely reliable accounting data, which may partially affect the results. Practical implications The findings contradict those exposed in the USA. The implications are the inverse of the US study: the duration-based explanation could be a vital factor for the value premium in the Brazilian stock market. Also, the findings support the standard valuation techniques and help the growth rates estimation in the valuation process (top-down approach). Originality/value This study is the first to compare the profitability and dividend growth of growth/value stocks in the Brazilian market. Overall, growth stocks have considerable profitability, and dividend growth compared to value stocks.

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Section: Resultssupporting

confidence: 84%

Section: Introductionmentioning

confidence: 99%

Value and growth stocks and shareholder value creation in Brazil

Vasconcelos

Martins

2019

REGE

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“…Studies of non‐US markets Fama and French (), Brückner et al (), Michou et al (), Veltri and Silvestri (), Moerman (), Nartea et al (), Chou et al (), Docherty et al (), Cordeiro and Machado (), Agarwalla et al (), Drew and Veeraraghavan (), among others.…”

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confidence: 99%

Fama–French in China: Size and Value Factors in Chinese Stock Returns

Chen

Shao

et al. 2018

Int Rev Finance

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We investigate the size and value factors in the cross-section of returns for the Chinese stock market. We find a significant size effect but no robust value effect. A zero-cost small-minus-big (SMB) portfolio earns an average premium of 0.61% per month, which is statistically significant with a t-value of 2.89 and economically important. In contrast, neither the market portfolio nor the zero-cost high-minus-low (HML) portfolio has average premiums that are statistically different from zero. In both time-series regressions and Fama-MacBeth cross-sectional tests, SMB represents the strongest factor in explaining the cross-section of Chinese stock returns. Our results contradict several existing studies which document a value effect. We show that this difference comes from the extreme values in a few months in the early years of the market with a small number of stocks and high volatility. Their impact becomes insignificant with a longer sample and proper volatility adjustment.

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Stand der wissenschaftlichen Forschung über Märkte und ihre Teilnehmer

Averbeck

2018

Added Value Von Behavioral-Finance-Fonds

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Value or Growth Strategy? Empirical Evidence in Brazil

Cited by 5 publications

References 25 publications

Value and growth stocks and shareholder value creation in Brazil

Value and growth stocks and shareholder value creation in Brazil

Fama–French in China: Size and Value Factors in Chinese Stock Returns

Stand der wissenschaftlichen Forschung über Märkte und ihre Teilnehmer

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