Worldwide Commodities Sector Market-to-Book and Return on Equity Valuation

54 Pages Posted: 23 Oct 2012

See all articles by Marcelo Bianconi

Marcelo Bianconi

Tufts University - Department of Economics

Joe Akira Yoshino

University of São Paulo (USP) - Department of Economics

Date Written: October 23, 2012

Abstract

We analyze panel data for the worldwide commodities sector using a sample of 6,323 firms from 69 countries with annual observations from 1999 to 2010. The effect of return on equity on market-to-book is time-varying and declining across the years in the sample. First, there is positive and strong persistence in the market-to-book of companies in this sector worldwide, but value stocks are more persistent than growth stocks in this sector. The effect of the return on equity is positive of about 0.9% on market-to-book per unit of return on equity at the 10th percentile of the market-to-book. This effect becomes negative 0.02% for growth stocks at 90th percentiles. For firms with negative profitability, the effect of return on equity on market-to-book is negative for growth stocks. The effect of the S&P500 volatility index Vix is negative, significant and large in magnitude, but declines in absolute value as the quantiles increase towards the upper 90th percentile.

Keywords: market-to-book ratio and return on equity, quantile regression

JEL Classification: G10, L70

Suggested Citation

Bianconi, Marcelo and Yoshino, Joe Akira, Worldwide Commodities Sector Market-to-Book and Return on Equity Valuation (October 23, 2012). Available at SSRN: https://ssrn.com/abstract=2166006 or http://dx.doi.org/10.2139/ssrn.2166006

Marcelo Bianconi (Contact Author)

Tufts University - Department of Economics ( email )

Medford, MA 02155
United States
617-627-2677 (Phone)

HOME PAGE: http://www.tufts.edu/~mbiancon

Joe Akira Yoshino

University of São Paulo (USP) - Department of Economics ( email )

Av. Prof. Luciano Gualberto 908
Sao Paulo SP, 05508-900
Brazil

HOME PAGE: http://www.usp.br/feaecon/perfil.php?i=10&u=57

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