Balance sheet conservativity and cross-section of stock returns

buir.advisorŞensoy, Ahmet
dc.contributor.authorErkenci, Dündar Alp
dc.date.accessioned2023-08-31T11:10:59Z
dc.date.available2023-08-31T11:10:59Z
dc.date.copyright2023-08
dc.date.issued2023-08
dc.date.submitted2023-08-28
dc.descriptionCataloged from PDF version of article.en_US
dc.descriptionIncludes bibliographical references (leaves 57-63).en_US
dc.description.abstractThe present study delves into the examination of various balance sheet measures and their significance in the cross-sectional pricing of stocks, to provide unique insights into the understanding of financial risk and its relation to balance sheet metrics. Based on these metrics, our study also sheds light on the importance and stability of a composite factor and its influence on stock prices. The findings of univariate portfolio sorts reveal that BLC (along with its parameters CDA, WCA, and LTDA) is a strong indicator of stock returns, corresponding to statistically significant seven-factor alphas for the high-low portfolios. Consistent results among bivariate portfolio sorts also support the BLC factor strength. The outcomes of Fama-Macbeth regressions for separate BLC parameters indicate positive risk premiums for each parameter when tested against ten different return predictors. Among other balance sheet measures, LTDA is the only BLC parameter associated with the capability to isolate significant risk premiums not proxied by extant anomalies in the literature. Comprehensive findings that are also supported by the summary statistics collectively indicate mixed effects of risk and underreaction-driven mispricing to explain the abnormal stock returns associated with the high-BLC characteristics of their issuers. The findings reveal high-performing investment strategies based on these metrics, and collectively favor more conservative financial policies for the stock-issuing firms.
dc.description.provenanceMade available in DSpace on 2023-08-31T11:10:59Z (GMT). No. of bitstreams: 1 B162436.pdf: 837297 bytes, checksum: 2d4cd28b3e0ffd2329065102598c125f (MD5) Previous issue date: 2023-08en
dc.description.statementofresponsibilityby Dündar Alp Erkenci
dc.format.extentx, 63 leaves ; 30 cm.
dc.identifier.itemidB162436
dc.identifier.urihttps://hdl.handle.net/11693/113798
dc.language.isoEnglish
dc.rightsinfo:eu-repo/semantics/openAccess
dc.subjectBalance sheet conservativity
dc.subjectCash-to-assets ratio
dc.subjectFinancial risk and mispricing
dc.subjectLong-term debt-to-assets ratio
dc.subjectWorking capital-to-assets ratio
dc.titleBalance sheet conservativity and cross-section of stock returns
dc.title.alternativeBilanço ihtiyatlılığının hisse fiyatlarına etkisi
dc.typeThesis
thesis.degree.disciplineBusiness Administration
thesis.degree.grantorBilkent University
thesis.degree.levelMaster's
thesis.degree.nameMBA (Master of Business Administration)

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