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Financial Statement Information, the Prediction of Book Return on Owners' Equity and Market Efficiency: The Swedish Case

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  • Stina Skogsvik

Abstract

Using Swedish data, this study investigates whether financial statement information can be used to predict changes in the medium‐term book return on owners' equity and subsequently evaluates the performance of trading strategies based on such predictions. A univariate prediction model based on the past book return has higher prediction accuracy than more elaborate models that include additional accounting numbers. The main trading strategy generates a hedge position return of 29% over a three‐year holding period. Interestingly, most of the return is attributable to the long position. However, the results are found to be sensitive to the choice of return metric.

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  • Stina Skogsvik, 2008. "Financial Statement Information, the Prediction of Book Return on Owners' Equity and Market Efficiency: The Swedish Case," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 35(7‐8), pages 795-817, September.
    • Handle: RePEc:bla:jbfnac:v:35:y:2008:i:7-8:p:795-817
    DOI: 10.1111/j.1468-5957.2008.02099.x
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    References listed on IDEAS

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    Cited by:

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    2. Stina Skogsvik & Kenth Skogsvik, 2010. "Accounting‐Based Probabilistic Prediction of ROE, the Residual Income Valuation Model and the Assessment of Mispricing in the Swedish Stock Market," Abacus, Accounting Foundation, University of Sydney, vol. 46(4), pages 387-418, December.
    3. Francesco Campanella & Mario Mustilli & Eugenio D¡¯Angelo, 2016. "Efficient Market Hypothesis and Fundamental Analysis: An Empirical Test in the European Securities Market," Review of Economics & Finance, Better Advances Press, Canada, vol. 6, pages 27-42, February.

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