EFFECTIVENESS OF THE USE OF INVESTMENT STRATEGY IN SHARES WITH LOW MULTIPLE PRICE/BOOK VALUE IN BRAZIL

Authors

  • Pierre Lucena Universidade Federal de Pernambuco - Centro de Ciências Sociais Aplicadas
  • Odilon Saturnino Silva Neto Universidade Federal de Pernambuco - Centro de Ciências Sociais Aplicadas
  • Joseanny Karla Vasconcelos Araújo Universidade Federal de Pernambuco - Centro de Ciências Sociais Aplicadas
  • Antônio Carlos Figueiredo Pontifícia Universidade Católica do Rio de Janeiro - Instituto de Administração e Gerência

Keywords:

PVPA index, Bovespa, Market anomalies, Data panel regression, Investment myth.

Abstract

This paper aims to test the hypothesis of abnormal returns from the strategy of investing in shares with lower Price/Value Ratio (PVPA) in the Brazilian capital market. All the shares negotiated in the Sao Paulo Stock Exchange (Bovespa) from 1994 to 2006 were used, and formed 6 portfolios according to the original criteria for choosing portfolios, in ascending order of PVPA, changed every year. Moreover, we tested the existence of significant change in the parameters of the CAPM Model through the regression analysis, incorporating to the model the variable corresponding to multiple PVPA. Afterwards, we also made a comparison between the governments of FHC and the first Lula’s administration, checking if there was significant change in the parameters of the regression, using the Chow Test of structural change. The results showed that there isn’t efficacy in the use of low PVPA as a measure of investment portfolio formation, rejecting the hypothesis tested both through the graphic analysis, which showed higher returns for the shares with greater PVPA, and through the inclusion of this index in CAPM, which indicated significant change on the beta parameters and in the comparison between the governments.

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Author Biographies

Pierre Lucena, Universidade Federal de Pernambuco - Centro de Ciências Sociais Aplicadas

Doutor em Administração/Finanças pela Pontifícia Universidade Católica do Rio de Janeiro (2005). Atualmente é professor adjunto do Curso de Administração de Empresas da Universidade Federal de Pernambuco, além de coordenador do Núcleo de Estudos em Finanças e Investimentos (NEFI/UFPE) e do Curso de Graduação em Administração de Empresas desta instituição.

Odilon Saturnino Silva Neto, Universidade Federal de Pernambuco - Centro de Ciências Sociais Aplicadas

Mestrando do Programa de Pós-Graduação em Administração (PROPAD) da Universidade Federal de Pernambuco – UFPE. Pesquisador do Núcleo de Estudos em Finanças e Investimentos (NEFI/UFPE). Professor de Finanças da Faculdade Santa Helena em Recife – PE.

Joseanny Karla Vasconcelos Araújo, Universidade Federal de Pernambuco - Centro de Ciências Sociais Aplicadas

Mestranda do Programa de Pós-Graduação em Administração (PROPAD) da Universidade Federal de Pernambuco – UFPE. Integrante do Núcleo de Estudos em Finanças e Investimentos (NEFI/UFPE). Chefe de Estudos e Pesquisas da Controladoria Geral do Estado.

Antônio Carlos Figueiredo, Pontifícia Universidade Católica do Rio de Janeiro - Instituto de Administração e Gerência

Doutor em Economia pela Fundação Getúlio Vargas - RJ (1985). Atualmente é professor do IAG (Instituto de Administração e Gerência) da Pontifícia Universidade Católica do Rio de Janeiro. Tem experiência e diversos trabalhos publicados na área de Administração, com ênfase em derivativos, mercados financeiros, administração de carteiras, "valuation" e opções reais.

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Published

2010-06-07

Issue

Vol. 11 No. 5 (2010)

Section

Strategic Finances

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