Macroeconomic factors and value and growth strategies: evidence from Brazil

Carrasco Gutierrez, Carlos Enrique and Peixoto Messias, Iasmin Emillyn (2022): Macroeconomic factors and value and growth strategies: evidence from Brazil.

Abstract

In this work we apply the arbitrage pricing theory (APT) model to study the effects of macroeconomic variables on investment strategies involving value and growth stocks listed on the Brazilian Stock Exchange (B3). To build and order the portfolios, we use four fundamental market indicators that permit identifying value and growth stocks. The macroeconomic variables used are real GDP, exchange rate, unemployment rate, money supply (M1), interest rate and consumer confidence index. The principal results are that growth strategies during the period studied were mainly influenced by unemployment, inflation and exchange while value strategies were preponderantly affected by GDP. In relation to the market risk factor, it was statistically significant for all the value and growth portfolios, and in general the market betas of the values stocks were greater than those of the growth stocks.

• Item Type: MPRA Paper
• Language: English
• Keywords: value strategies; growth strategies; financial returns; APT; macroeconomic variables
• Subjects: G - Financial Economics > G1 - General Financial Markets; G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing ; Trading Volume ; Bond Interest Rates

References

Alshihab, Salem. "Macroeconomic Determinants of Stock Market Returns in the Gulf Cooperation Council." International Journal of Economics and Financial Issues 11.2 (2021): 56.

Ambrozini, M. A. Análise do grau de evidenciação das operações com instrumentos financeiros derivativos pelas companhias brasileiras listadas no Ibovespa, Florianópolis: Revista Contemporânea de Contabilidade, cv, 11, n, 24, p, 25-42, 2014.

Baranidharan, S., & Dhivya, N.. Causal Influence of Macroeconomics Factors Shock on Indian Stock Market: Evidence from BSE Index. Asian Journal of Economics, Finance and Management, 2(2), 39-48, 2020.

Carrasco-Gutierrez, C.E. and Piazza, W. Evaluating asset pricing models in a Fama-French Framework. Brazilian Review of Finance, Vol 10, No 4 (2012).

Chellaswamy, K. P. ., N, N. ., & Faniband, M. Stock Market Sensitivity to Macroeconomic Factors: Evidence from China and India. Asian Economic and Financial Review, 10(2), 146–159, 2020. https://doi.org/10.18488/journal.aefr.2020.102.146.159

Cordeiro, Rebeca Albuquerque, & Machado, Márcio André Veras. Estratégia de Valor ou de Crescimento? Evidências Empíricas no Brasil. Revista Brasileira de Gestão de Negócios, 15(46), 91-111, 2013.

Costa Jr., Newton C. A. da, & Neves, Myrian B. Variáveis fundamentalistas e os retornos das ações. Revista Brasileira de Economia, 54(1), 123-137, 2000.

Garcia and Bonomo. Tests of conditional asset pricing models in the Brazilian stock market, Journal of International Money and Finance, Volume 20, Issue 1, 2001, Pages 71-90, 2001.

Fama, E, F,; French, K, R, The Cross-Section Of Expected Stock Returns, Journal of Finance, 47, 427-465, 1992.

Fama, E, F,; French, K, R, Common Risk Factors in the Returns on Stocks and Bond, Journal of Financial Economics, 33, 3-56, 1993.

Fama, E, F,; French, K, R, Size and Book-to-Market Factors in Earnings and Returns, Journal of Finance, 50, 131-155, 1995.

Garcia, R., & Bonomo, M. Tests of conditional asset pricing models in the Brazilian stock market. Journal of International Money and Finance, 20(1), 71–90, 2001.

Kabeer, M.A. Studied the Influence of Macroeconomic Factors on Stock Markets Performance in Top SAARC Countries and China. Journal of Business and Financial Affair, 2017.

Ikoku, Alvan E,; Okany, Chukwunonso T, Did the economic and financial crises affect stock Market sensitivity to macroeconomic risk factors? Evidence from Nigeria and South Africa, International Journal of Business, v, 19(3), 2014.

Iqmal, F. M., & Putra, I. G. S. Macroeconomic Factors and Influence on Stock Return That Impact the Corporate Values. International Journal of Finance & Banking Studies (2147-4486), 9(1), 68–75, 2020. https://doi.org/10.20525/ijfbs.v9i1.667

Králik, Lóránd István, Macroeconomic variables and stock market evolution, Bucharest: Academy of Economic Studies, 2012.

Kristjanpoller, Werner; Morales, Mauricio, Teoría de la asignación del precio por arbitraje aplicada al mercado accionario chileno, Medellin: Lecturas de Economía, 2011.

Leal, R. P. Uma ilustração da implementação do APT para carteiras de ações de valor e de crescimento brasileiras. Revista Eletrônica de Administração 10.4 (2004).

Malhotra, Karan, Autoregressive multifactor APT model for U.S. Equity Markets, New York University, 2010.

Markowitz, H, Portfolio selection, Journal of Finance, v,8, 1952.

Markowitz, H, M, Portfolio Selection: Efficient Diversification of Investments, Cowles Foundation Monograph, 16, Yale University Press, New Haven, 1959.

MOSSIN, Jan. Equilibrium in a capital asset market. Econometrica, v. 34, n. 4, p. 768–783, 1966.

Rebeschini A., M., & Leal P. C. Stock Fund Returns and Macroeconomic Variables in Brazil, Latin American Business Review, 17:2, 139-161, 2016.

Rostagno, Luciano, Soares, Rodrigo Oliveira, & Soares, Karina Talamini Costa. Estratégias de valor e de crescimento em ações na Bovespa: uma análise de sete indicadores relacionados ao risco. Revista Contabilidade & Finanças, 17(42), 7-21, Dec. 2006.

Sarika Keswani, Bharti Wadhwa, Association among the selected Macroeconomic factors and Indian stock returns, Materials Today: Proceedings, 2021.

Schor, A.; Bonomo, M. A.; Pereira, P. L. V. Arbitrage Pricing Theory (APT) e variáveis macroeconômicas: um estudo empírico sobre o mercado acionário brasileiro. Revista de Economia e Administração, v. 1, n. 1, p. 38-63, 2002.

Sharpe, W, Capital asset prices: a theory of market equilibrium under conditions of risk, Journal of Finance, v,19, 1964.