A Feasibility Study of Dissecting Stock Price Momentum Using Financial Statement Analysis
الموضوعات :
hamid bodaghi
1
(Department of Accounting, Kish International IAU Branch, Kish Island, Iran)
Rezvan Hejazi
2
(Department of Accounting, Khatam University, Tehran, Iran)
Mohammad Reza Mehrabanpour
3
(Department of Accounting, University of Tehran, Tehran, Iran)
الکلمات المفتاحية: stock price momentum, fundamental factors (fundamentals), stock future return, Financial Performance,
ملخص المقالة :
This paper sought to address the feasibility of dissecting stock price momentum in the firms listed in Tehran Stock Exchange using financial statement analysis (FSA). Different variables including those related to profitability, financial leverage and liquidity, and operating efficiency were used in this analysis. The study sample consisted of 130 firms listed in Tehran Stock Exchange over the period 2008-2019. The results showed that fundamental factors affected stock price momentum for one year in the winning portfolio and for two years in the losing one; after this period, financial information did not have a significant effect on stock price momentum. Therefore, stock price momentum performance is a function of the conformance of the past price performance to fundamentals. The results from investment strategies based on the past price performance-fundamentals conformance indicated that fundamentals cause a significant difference in stock excess returns in winning and losing portfolios.
[1] Ahmed, A.S., Safdar, I., Dissecting stock price momentum using financial statement analysis, Accounting and Finance, 2018, 58(1), P.3-43. Doi:10.1111/acfi.12358.
[2] Asness, C., Moskowitz, T., Pedersen, L., Value and momentum everywhere, The Journal of Finance, 2013, 68(3), P.929-985. Doi:10.1111/jofi.12021.
[3] Badri, A., Fathullahi, F., Return momentum: evidence from Tehran stock exchange, Investing Knowledge, 2014, 3(9), P.1-20. (in persian).
[4] Banz, R.W., The relationship between return and market value of common stocks, Journal of Financial Economics, 1981, 9(3), P.3-18. Doi:10.1016/0304-405X (81)90018-0.
[5] Bashir Khodaparasti, R., Saba, M., Boromandzadeh, H., The efficient Fama and French five-factor model in the offensive and defensive shares, Financial Management Strategy, 2018, 6(4), P.109-130. (in Persian). Doi:10.22051/JFM.2018.16192.1423.
[6] Basu, S., Investment performance of common stocks in relation to their price-earnings ratios: a test of the efficient market hypothesis. Journal of Finance, 1977, 12(3), P.129-156. Doi:10.1111/j.1540- 6261.1977.tb01979.x
[7] Basu, S., The relationship between earnings yield, market value, and return for nyse common stocks: further evidence. Journal of Financial Economics, 1983, 12(8), P.129-156. Doi:10.1016/0304-405X(83)90031-4.
[8] Bhandari, L., Debt/equity ratio and expected common stock returns: empirical evidence. Journal of Finance, 1988, 43(12), P.507-528. Doi:10.2307/2328473.
[9] Bin, G., Zhang, Y., Zhange, H., The five-factor asset pricing model tests for the Chinese Stock Market, Pacific-Basin Finance Journal, 2018, 43(4), P.84–106. Doi: 10.1016/j.pacfin.2017.02.001.
[10] Blackburn, D.W., Nusret, C., Frontier stock markets: local vs global factors, Gabelli School of Business, Fordham University Research, 2020, 29(3), P.108-127. Doi: 10.3905/joi.2020.1.124.
[11] Cakici, N., Fabozzi, F. J., Tan, S., Size, value, and momentum in emerging market stock returns, Emerging Markets Review, 2013, 16, P.46-65. Doi:10.2139/ssrn.2070832.
[12] Conrad, J. Kaul, G., An anatomy of trading strategies, The Review of Financial Studies, 1998, 11(3), P.489-519. Doi:10.1093/rfs/11.3.489.
[13] Daneshvar Mofrad, M., Hejazi, R., Mousavi M.H., Studying the impact of market, liquidity, and momentum on large changes in stock prices using cox regression, Financial Management Strategy, 2014, 2(2), P.1-19. (in Persian). Doi:10.22051/JFM.2015.980.
[14] Daniel, K., Hirshleifer, D., Subrahmanyam, A., Investor psychology and security market under and overreactions, Journal of Finance, 1998, 53(6), P.1839-1885. Doi:10.1111/0022-1082.00077.
[15] Davallou, M., Javadian, B., The timing of 52-week high price momentum: evidence from Tehran Stock Exchange, Financial Knowledge of Securities Analysis, 2017, 10(35), P.63-77. (in Persian).
[16] DeBondt, W.F.M., Thaler, R.H. Does the stock market overreact? Journal of Finance. 1985, 40(4), p.793-805. Doi:10.1111/j.1540-6261.1985.tb05004.x
[17] Eisdorfer, A., Misirli, E.U., Distressed stocks in distressed times, Management Science, 2020, 66(6), P.2452–2473. Doi:10.1287/mnsc.2019.3314.
[18] Elhaei Sahar, M., Hejazi, R., Salehi, A., Moltafet, H. Stock price momentum modeling: a grounded theory approach. advances in mathematical finance and applications, 2020, 5(2), P.167-181. Doi:10.22034/amfa.2020.1882300.1324
[19] Eslami Bidgoli, Gh., Nabavi Chashmi, S., Yahyazadehfar, M., Eikani, S., Investigating the profitability of momentum investing strategy in Tehran stock exchange. Quantitative Studies in Management, 2010, 1, P.49-78. (in Persian).
[20] Fama, E., French, K., Dissecting anomalies with a five-factor model, The Review of Financial Studies, 2016, 29(1), P.69–103. Doi:10.1093/rfs/hhv043.
[21] Fama, E., French, K., Common risk factors in the returns on stocks and bonds, Journal of Financial Economics, 1993, 33(1), P.3–56. Doi:10.1016/0304-405X (93)90023-5.
[22] Fama, E., French, K. The cross-section of expected stock returns. Journal of Finance,1992, 47(2), P.427-465. Doi:10.1111/j.1540-6261.1992.tb04398.x
[23] George, T. J., Hwang, C. Y., The 52-week high and momentum investing. Journal of Finance, 2004, 59(5), P.2145-2176. Doi:10.1111/j.1540-6261.2004.00695.x.
[24] Ghiyasvand, A., Darabi, R., Hamidian, M. Impact of momentum on stock returns in different market conditions. Advances in Mathematical Finance and Applications, 2020, 5(3), P.391-402. Doi:10.22034/amfa.2019.577556.1138.
[25] Grinblatt.M., Titman, S., Mutual fund performance: an analysis of quarterly portfolio holdings, Journal of Business, 1989, 62(3), P. 393-416. Doi:10.1086/296468
[26] Hajiannejad. A., Ebrahimi, M., Izadinia. N., A Comparison between basic Fama and French Three Factor model and basic Carhart four factors Model in Explaining the Stock return on Tehran Stock Exchange, Journal of Asset Mangament and Financing, 2014, 2(3), P.17-28. (in Persian). Doi.20.1001.1.23831170.1393.2.3.3.0.
[27] Hashemi, S.A., Mirki, F., Review the return on excess momentum risk in the Tehran stock exchange, Journal of Accounting and Social Interests, 2013, 3(1), P.39-56 (in Persian). Doi:10.22051/IJAR.2013.420.
[28] Hong H., Stein, J.C., A unified theory of underreaction, momentum trading, and overreaction in asset markets, The Journal of Finance, 1999, 54(6), p.2143-2184. Doi:10.1111/0022-1082.00184.
[29] Izadikhah, M. Financial Assessment of Banks and Financial Institutes in Stock Exchange by Means of an Enhanced Two stage DEA Model. Advances in Mathematical Finance and Applications, 2021, 6(2), P. 207-232. Doi: 10.22034/amfa.2020.1910507.1491
[30] Izadikhah, M., Using goal programming method to solve DEA problems with value judgments, Yugoslav Journal of Operations Research, 2016, 24 (2), P: 1-16, doi: 10.2298/YJOR121221015I
[31] Kebriyaie, A., Dehghan, A., evaluation of determining parameters in Iran stock market, Financial Engineering and Securities Management, 2020, 11(43), P.431-450. (in Persian). Doi:20.1001.1.22519165.1399.11.43.18.1.
[32] Kubota, K., Takehara, H., Does the Fama and French five-factor model work well in Japan? International Review of Finance, 2017, 18(1), P.137-146. Doi:10.1111/irfi.12126
[33] Lewellen, J., Momentum and autocorrelation in stock returns, Review of Financial Studies, 2002, 15(2), P.533-563. Doi:10.1093/rfs/15.2.533
[34] McKnight.P. J, Hou.T.C. T., The determinants of momentum in the United Kingdom, The Quarterly Review of Economics and Finance, 2006, 46(2), P.227-240. Doi:10.1016/J.QREF.2005.11.004.
[35] Moreira, A. Muir, T., Should long-term investors time volatility? Journal of Financial Economics, 2020, 131, P.507-527. Doi:10.1016/j.jfineco.2018.09.011
[36] Moskowitz, T., Grinblatt, M., Do industry explain momentum? The Journal of Finance, 1999, 54(4), P.1249-1290. Doi:10.1111/0022-1082.00146.
[37] Mousavi Shiri, M., Salehi, M., Shakeri, M., Bakhshian, A., Profitability of momentum strategy and the effect of stock trading volume on it in Tehran Stock Exchange, Journal of Financial Engineering and Securities Management, 2016, 6(25), P.107-124. (in Persian). Doi:20.1001.1.22519165.1394.6.25.6.8
[38] Piotroski, J. D., Value investing: the use of historical financial statement information to separate winners from losers, Journal of Accounting Research, 2000, 38, P. 1–41. Doi:10.2307/2672906.
[39] Qi, L., Noisy prices and the Fama–French five-factor asset pricing model in China, Emerging Markets Review, 2018, 31(3), P.141–163. Doi. 10.1016/j.ememar.2017.04.002.
[40] Rahimpour, M., Ghaemi, M.H., Evaluation of the pricing model and calendar-time portfolio approach in long-term event study, Empirical Studies in Financial Accounting, 2019, 15(61), P.101-130. (in Persian). Doi:10.22054/qjma.2019.41172.1991.
[41] Ranjbar, M.H., Badiee, H., Mohebi, M., Review and assessment of capital assets pricing models and compare them with the 5-factor model of Fama and French whit using economic variables exchange; rates inflation, import and liquidity, Financial Knowledge of Securities Analysis, 2019, 12(42), P.195-215.(in Persian).
[42] Rosenberg, B., Reid, K., Lanstein, R. Persuasive evidence of market inefficiency, Journal of Portfolio Management,1985, 11(3), P.9-17. Doi:10.3905/jpm.1985.409007.
[43] Ross, S. Risk, return and arbitrage, in Finance I, Friend, I. and Bicksler, J. (Eds.), Risk and Return in Finance, Ballinger , Cambridge, 1976.
[44] Salehi, M., Hejazi, R., Talebnia, Gh., Amiri, A., A scheme of CAPM models considering momentum premium, Financial Knowledge of Securities Analysis, 2019, 12(43), P. 223-239.(in Persian).
[45] Sharpe, W.F. Capital Asset Prices: A Theory of Market Equilibrium Under Conditions of Risk, Journal of Finance,1964, 19(3), P. 425-442. Doi: j.1540-6261. 1964.tb02865. x.
[46] Shen, Q., Szakmary, A.C., Shamara, S.C., Momentum and contrarian strategies in international stock market. Further evidence, Journal of Multinational financial managemen, 2005, 15, P.235-255. Doi:10.1016/j.mulfin.2004.09.001.
[47] Stattman, D., Book Values and Stock Returns, The Chicago MBA: A Journal of Selected Papers, 1980, 4, P.25–45.
[48] Sundqvist, T., Tests of a Fama-French five factor asset pricing model in nordic stock markets, Department of Finance, Hanken School of Economics, 2017.
[49] Taqian Dinani, Z., Farid, D., Relationship between momentum excess returns and systematic risk in Tehran stock exchange, financial management perspective, 2016, 6(16), p.9-30. (in Persian).
[50] Yazdani Varzi, A., Memarian, E., Nabavi Chashmi, S, A., pattern explanation of micro and macro variables on return of stock trading strategies, Advances in Mathematical Finance and Applications, 2022, 7(4), P.997-1011. Doi:10.22034/amfa.2021.1912667.1501.
