PROFITABILITY ANALYSIS OF BOVESPA STOCKS WITH LOW PE RATIO AND GOOD LIQUIDITY BETWEEN 1999 AND 2007

Authors

  • José Guilherme Chaves Alberto Pontificia Universidade Católica de Minas Gerais
  • Bruno Lucio Santos Vieira Ohio University

DOI:

https://doi.org/10.5380/rcc.v3i3.19713

Keywords:

Price Earnings, Ratio, Liquidity, Ibovespa.

Abstract

This study sought to verify if return on stocks with low price/earnings ratio and good liquidity outperform the Ibovespa. As criteria to reduce liquidity risk, the stocks in the sample had been at least once, according to Bovespa, among the most traded in Brazil during the period of 1999 through 2007. Each year, these stocks had been classified into quartiles in accordance with the price/earnings ratio. Two hypotheses were tested for the lower quartile: a) if it outperforms the Ibovespa more often than the others; and b) if its average returns is greater than the Ibovespa. The results indicate that investing on stocks with low price/earnings index and good liquidity, assuming a one year holding period, can be yield return above the Ibovespa. Although the correlation between price/earnings ratio and returns does not imply causality, the lower quartile has outperformed the Ibovespa in all periods included in the sample.

Author Biographies

José Guilherme Chaves Alberto, Pontificia Universidade Católica de Minas Gerais

Possui graduação em Administração de Empresas pela Faculdade Ciências Gerenciais UNA (2000) e mestrado em Gestión Internacional de las Empresas pela Universidad de Zaragoza / Espanha (2003). Professor assistente da Pontifícia Universidade Católica de Minas Gerais e do Centro Universitário UNA.

Bruno Lucio Santos Vieira, Ohio University

Aluno mestrado Economia Financeira.

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Published

2011-10-21

How to Cite

Alberto, J. G. C., & Vieira, B. L. S. (2011). PROFITABILITY ANALYSIS OF BOVESPA STOCKS WITH LOW PE RATIO AND GOOD LIQUIDITY BETWEEN 1999 AND 2007. Revista Contabilidade E Controladoria - RC&C, 3(3). https://doi.org/10.5380/rcc.v3i3.19713

Issue

Vol. 3 No. 3 (2011): Volume 3| Número 3| Set./Dez.| 2011

Section

Articles

License

Copyright (c) 2011 Revista Contabilidade e Controladoria - RC&C

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