Trading Strategy on EVA® and MVA

Abstract

The positive risk-adjusted return of the winner group is found when adjusted-MVA is designated as the ranking variable. This return is higher than the one in the loser group. However, both returns are at an insignificant level. The p-values for each factor loading as well as the F-values are all significant, while the adjusted R-squares range between 0.5578–0.8801. Hence, the authors suspect that the adjusted-MVA variable may be a weak alternative indicator of earnings momentum. At the same time, the authors conclude that the Fama-French model successfully captures the return components.

TOPICS: Analysis of individual factors/risk premia, performance measurement, factor-based models