Quality investing in CEE emerging markets
Using sorting, cross-sectional tests, regression, and tests of a monotonic relation, the study examines the return patterns related to seven distinct quality characteristics: accruals, bid-ask spread, balance sheet liquidity, profitability, leverage, payout ratio and turnover. The investigation of...
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| Format: | Article |
| Language: | English |
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Vilnius Gediminas Technical University
2014-12-01
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| Series: | Business, Management and Education |
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| Online Access: | http://journals.vgtu.lt/index.php/BME/article/view/3504 |
| Summary: | Using sorting, cross-sectional tests, regression, and tests of a monotonic relation, the study examines the return patterns related to seven distinct quality characteristics: accruals, bid-ask spread, balance sheet liquidity, profitability, leverage, payout ratio and turnover. The investigation of more than 1.300 stocks from 11 Central and Eastern European countries for the period 2002–2014 documents a strong gross-profitability premium and an inverted liquidity premium. Profitable and not heavily leveraged companies provide a partial hedge against market distress. Finally, the paper proposes quality spreads as a forecasting tool and shows that they have predictive abilities over quality premiums related to leverage, profitability and bid-ask spread.
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| ISSN: | 2029-7491 2029-6169 |