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Bartram, Söhnke M. and Grinblatt, Mark (2018) Agnostic fundamental analysis works. Journal of Financial Economics, 128 (1). pp. 125-147. doi:10.1016/j.jfineco.2016.11.008 ISSN 0304-405X.
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Official URL: https://doi.org/10.1016/j.jfineco.2016.11.008
Abstract
To assess stock market informational efficiency with minimal data snooping, we take the view of a statistician with little knowledge of finance. The statistician uses techniques such as least squares to estimate peer-implied fair values from the market values of replicating portfolios with the same accounting statements as the company being valued. Divergence of a company's peer-implied value estimate from its market value represents mispricing, motivating a convergence trade that earns risk-adjusted returns of up to 10% per year and is economically significant for both large and small cap firms. The rate of convergence decays to zero over the subsequent 34 months.
| Item Type: | Journal Article | ||||||||
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| Subjects: | H Social Sciences > HF Commerce H Social Sciences > HG Finance |
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| Divisions: | Faculty of Social Sciences > Warwick Business School > Finance Group Faculty of Social Sciences > Warwick Business School |
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| Library of Congress Subject Headings (LCSH): | Valuation, Assets (Accounting), Assets (Accounting) -- Prices, Efficient market theory, Fair value, Fair value -- Accounting | ||||||||
| Journal or Publication Title: | Journal of Financial Economics | ||||||||
| Publisher: | Elsevier Science BV | ||||||||
| ISSN: | 0304-405X | ||||||||
| Official Date: | April 2018 | ||||||||
| Dates: |
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| Volume: | 128 | ||||||||
| Number: | 1 | ||||||||
| Page Range: | pp. 125-147 | ||||||||
| DOI: | 10.1016/j.jfineco.2016.11.008 | ||||||||
| Status: | Peer Reviewed | ||||||||
| Publication Status: | Published | ||||||||
| Access rights to Published version: | Restricted or Subscription Access | ||||||||
| Date of first compliant deposit: | 26 September 2017 | ||||||||
| Date of first compliant Open Access: | 15 June 2019 | ||||||||
| Related URLs: |
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