The relevance of using accounting fundamentals in the Euronext 100 index

• Autor(a) principal: Daniel Navas, Raúl
• Data de Publicação: 2023
• Outros Autores: Matias Gama, Ana Paula, Ricardo Bentes, Sónia
• Tipo de documento: Artigo
• Idioma: eng
• Título da fonte: Revista Brasileira de Gestão de Negócios (Online)
• Texto Completo: https://rbgn.fecap.br/RBGN/article/view/4245
• topic: European capital markets; accounting fundamentals; stock returns; portfolio formation; Euronext 100 index; Mercados de capitais europeus; fundamentos contábeis; retornos de ações; formação de portfólio

Purpose – The purpose of this research is to investigate whether using an accountingfundamental strategy can provide valuable information about the value of a businessand generate positive excess buy-and-hold returns on stocks in the Euronext 100 index.Theoretical framework – The theoretical framework of the study is based on thecombination of valuation theory and accounting research. We rely on fundamentalanalysis as a stock valuation method, which involves looking at both quantitativeand qualitative information in a company’s economic and financial records.Design/methodology/approach – We examine the relevance of growth and earningsresponse coefficients, as well as Piotroski’s F-scores and Lev and Thiagarajan’s L-scoresin predicting future stock returns. The analysis covers the years 2000 to 2020.Findings – The study finds that accounting fundamental signals provide value-relevantinformation to investors and have a significant and positive relationship withfuture buy-and-hold market returns, resulting in high-scoring portfolios achievingsignificant average annual market excess returns.Practical & social implications of research – The results of the study havepractical implications for investors who use fundamental analysis as an investmentstrategy. The results indicate that accounting fundamentals provide value-relevantinformation to investors and can lead to positive excess buy-and-hold returns.Originality/value – The study contributes to the understanding of the role offundamentals in firm valuation and provides fresh insights into binary models andfundamental analysis applied to European markets. In addition, the study teststhe robustness of fundamental strategies using fixed effects regression analysis.Keywords: European capital markets, accounting fundamentals, stock returns,portfolio formation, Euronext 100 index.