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Deviations From Accounting Fundamentals and the Predictability of Stock Return

Other title财务基本面偏差与股票收益的可预测性
ContributorsChen, Shengjie
Number of pages42
Imprimatur date2021
Defense date2021
Abstract

Prior studies have found that investors in the China's stock market tend to over-react to news, rarely show under-reaction behaviors. The latest research in the United States find that investors in the American stock market under-react to changes in financial fundamentals. This paper constructs a factor by using deviations from financial fundamentals to predict stock returns in the Chinese market, and enriches the research of investors’ insufficient responses to the changes of financial fundamentals. Results show that the factor constructed by using deviations from financial fundamentals can significantly positively predict future stock returns. Specifically, after our backtesting, the investment strategy based on that factor yields an annual return of 28.98% and a sharp ratio of 0.89 from January 2006 to October 2021. Returns of this investment strategy are still significant considering value-weighted investments, and excluding shell companies and state-owned enterprises.

engchi
Keywords
  • China’s stock market
  • Under-reaction
  • Financial fundamentals deviations
  • Stock returns prediction
Citation (ISO format)
CHEN, Shengjie. Deviations From Accounting Fundamentals and the Predictability of Stock Return. 2021.
Main files (2)
Thesis
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Thesis - Version chinoise
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Identifiers
  • PID : unige:172729
  • Thesis number : DAPS-0003
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Creation11/07/2023 10:13:07 AM
First validation11/07/2023 10:55:14 AM
Update time03/11/2024 2:35:07 PM
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