Empirical Evidence of Profitability Anomaly in the Thai Stock Market

• Autorzy: Yosuke Kakinuma
• Języki publikacji: EN

Abstrakty

EN

This study presents empirical evidence of profitability anomaly in the Stock Exchange of Thailand. The effects of gross profitability, operating profitability, and cash flow-to-price (C/P) on the subsequent stock returns are examined using the data from 2002 to 2019. The results of Fama-Macbeth (1973) regression and Carhart (1997) four-factor model indicate that gross profitability and C/P have significant explanatory power for future returns but not operating profitability. Further analysis confirms that gross profitability-sorted portfolio generates the largest risk-adjusted return and C/P-sorted portfolio presents the best consistency to outperform the market. Investing in the portfolios consisted of stocks with high gross profitability and C/P provides protection from the market downside. (original abstract)

Słowa kluczowe

PL

Rynki wschodzące; Papiery wartościowe; Przepływy pieniężne; Stopa zwrotu akcji

EN

Emerging markets; Securities; Cash flows; Stock rate of returns

• Czasopismo: Journal of International Studies
• Rocznik: 2020
• Tom: 13
• Numer: nr 4
• Strony: 89-100

Twórcy

autor

Yosuke Kakinuma

• Panyapiwat Institute of Management, Thailand

Bibliografia

• Ahmed, A. S., & Safdar, I. (2018). Dissecting stock price momentum using financial statement analysis. Accounting and Finance, 58, 3-43. https://doi.org/10.1111/acfi.12358
• Akbas, F., Jiang, C., & Koch, P. D. (2017). The trend in firm profitability and the cross-section of stock returns. Accounting Review, 92(5), 1-32. https://doi.org/10.2308/accr-51708
• Asness, C., Frazzini, A., & Pedersen, L. (2019). Quality Minus Junk Discussion. Review of Accounting Studies, 24(1), 34-112ba. https://doi.org/10.2139/ssrn.2312432
• Ball, R., Gerakos, J., Linnainmaa, J. T., & Nikolaev, V. (2016). Accruals, cash flows, and operating profitability in the cross section of stock returns. Journal of Financial Economics, 121(1), 28-45. https://doi.org/10.1016/j.jfineco.2016.03.002
• Ball, R., Gerakos, J., Linnainmaa, J. T., & Nikolaev, V. V. (2015). Deflating profitability. Journal of Financial Economics, 117(2), 225-248. https://doi.org/10.1016/j.jfineco.2015.02.004
• Barillas, F., & Shanken, J. (2018). Comparing Asset Pricing Models. Journal of Finance, 73(2), 715-754. https://doi.org/10.1111/jofi.12607
• Barry, C. B., Goldreyer, E., Lockwood, L., & Rodriguez, M. (2002). Robustness of size and value effects in emerging equity markets, 1985-2000. Emerging Markets Review, 3(1), 1-30.
• Bartram, S., & Grinblattcd, M. (2020). Global market inefficiencies. Journal of Financial Economics, In Presss. https://doi.org/https://doi.org/10.1016/j.jfineco.2020.07.011
• Bouchaud, J. P., Krüger, P., Landier, A., & Thesmar, D. (2019). Sticky Expectations and the Profitability Anomaly. Journal of Finance, 74(2), 639-674. https://doi.org/10.1111/jofi.12734
• Cakici, N., Fabozzi, F. J., & Tan, S. (2013). Size, value, and momentum in emerging market stock returns. Emerging Markets Review, 16, 46-65. https://doi.org/10.1016/j.ememar.2013.03.001
• Carhart, M. (1997). On Persistence in Mutual Fund Performance. Journal of Finance, 52(1), 57-82. https://doi.org/10.2307/2329556
• Cayón, E., & Sarmiento, J. (2020). Testing for contagion from oil and developed markets to emerging markets : An empirical analysis using systemic risk parameter. Journal of International Studies, 13(2), 98-108. https://doi.org/10.14254/2071-8330.2020/13-2/7
• Chan, L., Lakonishok, J., & Sougiannis, T. (2001). The Stock Market Valuation of Research and Development Cost. The Journal of Finance, 56(6), 2431-2456. https://doi.org/10.1111/0022-1082.00411
• Cheema, M. A., & Scrimgeour, F. (2019). Oil Prices and Stock Market Anomalies. Energy Economics. https://doi.org/10.2139/ssrn.3200162
• Chemmanur, T. J., & Yan, A. (2019). Advertising, Attention, and Stock Returns. Quarterly Journal of Finance, 9(3), 1950009. https://doi.org/10.1142/s2010139219500095
• Chen, T. F., Sun, L., Wei, K. C. J., & Xie, F. (2018). The profitability effect: Insights from international equity markets. European Financial Management, 24(4), 545-580. https://doi.org/10.1111/eufm.12189
• Chiah, M., & Zhong, A. (2019). Day-of-the-week effect in anomaly returns: International evidence. Economics Letters, 182, 90-92. https://doi.org/10.1016/j.econlet.2019.05.042
• Dooley, M., & Hutchison, M. (2009). Transmission of the U.S. subprime crisis to emerging markets: Evidence on the decoupling-recoupling hypothesis. Journal of International Money and Finance, 28(8), 1331-1349. https://doi.org/https://doi.org/10.1016/j.jimonfin.2009.08.004
• Eisfeldt, A. L., & Papanikolaou, D. (2013). Organization capital and the cross-section of expected returns. Journal of Finance, 68(4), 1365-1406. https://doi.org/10.1111/jofi.12034
• Fama, Eugene F., Macbeth, D. (1973). Risk, Return, and Equilibrium: Empirical Tests. Journal of Political Economy, 81(3), 607-636. https://doi.org/10.1086/260061
• Fama, E., & French, K. (1992). The Cross- Section of Expected Stock Returns. The Journal of Finance, 47(2), 427-465. https://doi.org/10.1111/j.1540-6261.1992.tb04398.x
• Fama, E., & French, K. (1993). Common risk factors in the returns stocks and bonds. Journal of Financial Economics, 33(1), 3-56. https://doi.org/10.1016/0304-405X(93)90023-5
• Fama, E., & French, K. (2015). A five-factor asset pricing model. Journal of Financial Economics, 116(1), 1-22.
• Fama, E., & French, K. (2017). International tests of a five-factor asset pricing model. Journal of Financial Economics, 123(3), 441-463. https://doi.org/10.1016/j.jfineco.2016.11.004
• Foerster, S., Tsagarelis, J., & Wang, G. (2018). Are Cash Flows Better Stock Return Predictors Than Profits ? Financial Analysts Journal, 73(1), 73-99. https://doi.org/10.2469/faj.v73.n1.2
• Hanauer, M. X., & Lauterbach, J. G. (2019). The cross-section of emerging market stock returns. Emerging Markets Review, 38(November 2018), 265-286. https://doi.org/10.1016/j.ememar.2018.11.009
• Hou, K., Karolyi, G. A., & Kho, B. (2011). What Factors Drive Global Stock Returns? Review of Financial Studies, 24(8), 2527-2574. https://doi.org/10.1093/rfs/hhrO13
• Hou, K., Xue, C., & Zhang, L. (2015). Digesting Anomalies: An Investment Approach. Review of Financial Studies, 28(3), 650-705. https://doi.org/10.1093/rfs/hhu068
• Jacobs, H. (2016). Market maturity and mispricing. Journal of Financial Economics. https://doi.org/10.1016/j.jfineco.2016.01.030
• Jegadeesh, N., & Titman, S. (1993). Efficiency Returns to Buying Winners and Selling Losers : Implications for Stock Market Efficiency. The Journal of Finance, 48(1), 65-91. https://doi.org/10.1111/j.1540-6261.1993.tb04702.x
• Jegadeesh, N., & Titman, S. (2001). Profitability of Momentum Strategies : An Evaluation of Alternative Explanations. The Journal of Finance, 56(2), 699-720. https://doi.org/10.1111/0022-1082.00342
• Jongadsayakul, W. (2019). Determinants of investor behavior in SET50 index futures and options markets: Evidence from Thailand futures exchange. Journal of International Studies, 12(3), 22-30. https://doi.org/10.14254/2071-8330.2019/12-3/2
• Khalaf, L., & Schaller, H. (2012). How Fama-MacBeth Can Go Wrong - And an Informative Solution. SSRN, (613). https://doi.org/10.2139/ssrn.1785858
• Lakonishok, J., Shleifer, A., & Robert, W. V. (1994). Investment, Extrapolation, and Risk. The Journal of Finance, 49(5), 1541-1578. https://doi.org/10.1177/0022002705277551
• Lau, W. T., & Mahat, F. B. (2019). Robustness of cash flow value: Investment in ASEAN. Journal of Asian Finance, Economics and Business, 6(2), 247-255. https://doi.org/10.13106/jafeb.2019.vol6.no2.247
• Lev, B., & Radhakrishnan, S. (2015). The Valuation of Organization Capital. In Measuring Capital in the New Economy (pp. 73-110). Retrieved from http://www.nber.org/chapters/c10619
• Najmudin, Syarif, D. H., Wahyudi, S., & Muharam, H. (2017). Applying an international CAPM to herding behaviour model for integrated stock markets. Journal of International Studies, 10(4), 47-62. https://doi.org/10.14254/2071-8330.2017/10-4/3
• Ng, C. C. A., & Shen, J. (2019). Quality investing in Asian stock markets. Accounting and Finance. https://doi.org/10.1111/acfi.12446
• Novy-Marx, R. (2013). The other side of value: The gross profitability premium. Journal of Financial Economics, 108(1), 1-28. https://doi.org/10.1016/j.jfineco.2013.01.003
• Pasquariello, P. (1999). The Fama-MacBeth approach revisited. Stern School of Business, New York University.Working Paper. Retrieved from http://webuser.bus.umich.edu/ppasquar/famamacbeth.pdf
• Plastun, A., Kozmenko, S., Plastum, V., & Filatova, H. (2019). Market anomalies and data persistence: The case of the day-of-the-week effect. Journal of International Studies, 12(3), 122-130. https://doi.org/10.14254/2071-8330.2019/12-3/10
• Rouwenhorst, K. G. (1999). Local return factors and turnover in emerging stock markets. Journal of Finance, 54(4), 1439-1464. https://doi.org/10.1111/0022-1082.00151
• Tiwari, A. K., Aye, G. C., & Gupta, R. (2019). Stock market efficiency analysis using long spans of data: A multifractal detrended fluctuation approach. Finance Research Letters, 28, 398-411. https://doi.org/https://doi.org/10.1016/j.frl.2018.06.012
• van der Hart, J., de Zwart, G., & van Dijk, D. (2005). The success of stock selection strategies in emerging markets: Is it risk or behavioral bias? Emerging Markets Review, 6(3), 238-262. https://doi.org/10.1016/j.ememar.2005.05.002
• van der Hart, J., Slagter, E., & van Dijk, D. (2003). Stock selection strategies in emerging markets. Journal of Empirical Finance, 10(1-2), 105-132. https://doi.org/10.1016/S0927-5398(02)00022-1
• Zaremba, A. (2019). Performance Persistence in Anomaly Returns: Evidence from Frontier Markets. Emerging Markets Finance and Trade, 0(00), 1-22. https://doi.org/10.1080/1540496X.2019.1605594
• Zhang, L. (2017). The Investment CAPM. European Financial Management, 23(4), 545-603.

Identyfikatory

DOI

10.14254/2071-8330.2020/13-4/6