Fundamental analysis and future firm performance - Nordic evidence

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dc.contributor Aalto-yliopisto fi
dc.contributor Aalto University en
dc.contributor.author Ranta, Olli
dc.date.accessioned 2014-08-06T08:38:17Z
dc.date.available 2014-08-06T08:38:17Z
dc.date.issued 2014
dc.identifier.uri https://aaltodoc.aalto.fi/handle/123456789/13658
dc.description.abstract This study examines the relation between fundamental analysis, future earnings changes, and future stock prices. Fundamental analysis is based on 7 fundamental signals derived from financial statements measuring contemporaneous corporate financing activities and current changes in inventories, accounts receivable, SG&A expenses, gross margin, asset turnover, and labor force efficiency. First, the relation between fundamental signals and subsequent earnings changes is examined. After establishing these relations, it is investigated whether positive abnormal returns can be earned by exploiting the information conveyed by fundamental signals as a trading strategy. This is tested by forming annual zero net investment (hedge) portfolios that buy (sell) fundamentally strong (weak) companies. Analyses are conducted using OLS regressions. The sample consists of companies listed in OMX Helsinki, OMX Stockholm, OMX Copenhagen and Oslo Børs between 2006 and 2013. Sample size is 1,508 firm year observations. Findings provide partial evidence on the usefulness of fundamental analysis in predicting future earnings changes. However, the relation between some fundamental signals and future earnings changes is opposite to expected. Findings are not fully consistent with prior literature. Fundamental trading strategy on aggregate level does not yield statistically significant abnormal returns. However, labor force and inventory signals have a positive relation to future earnings changes and future abnormal returns. This implies market inefficiency in digesting the forward-looking information conveyed by these signals. Abnormal return to asset turnover signal is not consistent with its relation to future earnings changes, posing some doubt on the suggested interpretation of observed abnormal returns. However, the observed abnormal returns to inventory and labor force signals are robust to various tests. All data are available from public sources. en
dc.format.extent 71
dc.language.iso en en
dc.title Fundamental analysis and future firm performance - Nordic evidence en
dc.type G2 Pro gradu, diplomityö fi
dc.contributor.school Kauppakorkeakoulu fi
dc.contributor.school School of Business en
dc.contributor.department Laskentatoimen laitos fi
dc.contributor.department Department of Accounting en
dc.subject.keyword fundamental analysis
dc.subject.keyword earnings prediction
dc.subject.keyword market efficiency
dc.subject.keyword stock returns
dc.identifier.urn URN:NBN:fi:aalto-201408062322
dc.type.dcmitype text en
dc.programme.major Accounting en
dc.programme.major Laskentatoimi fi
dc.type.ontasot Master's thesis en
dc.type.ontasot Pro gradu tutkielma fi
dc.subject.helecon laskentatoimi
dc.subject.helecon accounting
dc.subject.helecon tulos
dc.subject.helecon return
dc.subject.helecon tuotto
dc.subject.helecon rate of return
dc.subject.helecon arviointi
dc.subject.helecon evaluation
dc.subject.helecon mittarit
dc.subject.helecon ratings
dc.subject.helecon ennusteet
dc.subject.helecon forecasts
dc.subject.helecon tehokkuus
dc.subject.helecon effectiveness
dc.subject.helecon markkinat
dc.subject.helecon markets
dc.ethesisid 13617
dc.date.dateaccepted 2014-02-13
dc.location P1 I fi


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