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All Journal Gadjah Mada International Journal of Business
Zaki Baridwan
Faculty of Economics and Business, Universitas Gadjah Mada
Economics, Econometrics & Finance

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Accounting Fundamentals and the Variation of Stock Price: Factoring in the Investment Scalability Sumiyana Sumiyana; Zaki Baridwan; Slamet Sugiri; Jogiyanto Hartono
Gadjah Mada International Journal of Business Vol 12, No 2 (2010): May - August
Publisher : Master in Management, Faculty of Economics and Business, Universitas Gadjah Mada

Show Abstract | Download Original | Original Source | Check in Google Scholar | Full PDF (398.943 KB) | DOI: 10.22146/gamaijb.5508

Abstract

This study develops a new return model with respect to accounting fundamentals. The new return model is based on Chen and Zhang (2007). This study takes into account theinvestment scalability information. Specifically, this study splitsthe scale of firm’s operations into short-run and long-runinvestment scalabilities. We document that five accounting fun-damentals explain the variation of annual stock return. Thefactors, comprised book value, earnings yield, short-run andlong-run investment scalabilities, and growth opportunities, co associate positively with stock price. The remaining factor,which is the pure interest rate, is negatively related to annualstock return. This study finds that inducing short-run and long-run investment scalabilities into the model could improve the degree of association. In other words, they have value rel-evance. Finally, this study suggests that basic trading strategieswill improve if investors revert to the accounting fundamentals.Keywords: accounting fundamentals; book value; earnings yield; growth opportuni­ties; short­run and long­run investment scalabilities; trading strategy;value relevance
Co-Authors Jogiyanto Hartono Slamet Sugiri Sumiyana Sumiyana