Short-Run Asset Selection using a Logistic Model

Investors constantly look for significant predictors and accurate models to forecast future results, whose occasional efficacy end up being neutralized by market efficiency. Regardless, such predictors are widely used for seeking better (and more unique) perceptions. This paper aims to investigate t...

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Bibliographic Details
Published in:Revista Brasileira de Finanças 2011-06, Vol.9 (2), p.227-256
Main Authors: Walter Gonçalves Junior, Fábio Gallo Garcia, William Eid Junior, Luciana Ribeiro Chalela
Format: Article
Language:English
Subjects:
Financial indicators
financial market
market efficiency
predictors
returns predictability
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Summary:Investors constantly look for significant predictors and accurate models to forecast future results, whose occasional efficacy end up being neutralized by market efficiency. Regardless, such predictors are widely used for seeking better (and more unique) perceptions. This paper aims to investigate to what extent some of the most notorious indicators have discriminatory power to select stocks, and if it is feasible with such variables to build models that could anticipate those with good performance. In order to do that, logistical regressions were conducted with stocks traded at Bovespa using the selected indicators as explanatory variables. Investigated in this study were the outputs of Bovespa Index, liquidity, the Sharpe Ratio, ROE, MB, size and age evidenced to be significant predictors. Also examined were half-year, logistical models, which were adjusted in order to check the potential acceptable discriminatory power for the asset selection.
ISSN:1679-0731
1984-5146