학회소식
학회소식
[2010년 제 4차] Country, Industry and Idiosyncratic Components in V
작성자 : 관리자
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게시일 :
2010-12-09
In this study, we examine the role of importance of country, industry and firm idiosyncratic components in determining firm valuation ratios. Using a sample of firms from 33 countries, we decompose Book-to-Market and Earnings-to-Price ratios into country, industry, and idiosyncratic components. Compared to industry membership, country membership has significantly more impact on the two valuation ratios. The two valuation ratios are found to predict subsequent stock returns around the world, and most of the predictability comes from idiosyncratic component of the two ratios. Evaluating how Book-to-Market and Earnings-to-Price ratios change over time, we find that the idiosyncratic and country components are the main drivers of the valuation ratios. However, the importance of country vs idiosyncratic proportion differs across countries. Such difference can be explained by country-level governance, market efficiency, capital openness, firm-level illiquidity and information uncertainty.