Comparison of the residual income valuation, abnormal earnings growth and free cash flow models: an empirical study of the Brazilian capital market/Comparacao entre os modelos Residual Income Valuation : um estudo empirico no mercado de capitais brasileiro

This study compares the explanatory power of the residual income valuation (RIV), abnormal earnings growth (AEG) and free cash flow (FCF) models in the Brazilian capital market, through an empirical test to compare the three models, using data on companies listed on the BOVESPA. Each model was analy...

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Bibliographic Details
Published in:BBR Brazilian business review (Portuguese ed.) 2008-05, Vol.5 (2), p.143
Main Authors: Ferreira, Eric Serrano, Nossa, Valcemiro, Ledo, Bruno Cesar Aurichio, Teixeira, Arilda Magna Campanharo, Lopes, Alexsandro Broedel
Format: Article
Language:Portuguese
Subjects:
Capital market
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Summary:This study compares the explanatory power of the residual income valuation (RIV), abnormal earnings growth (AEG) and free cash flow (FCF) models in the Brazilian capital market, through an empirical test to compare the three models, using data on companies listed on the BOVESPA. Each model was analyzed annually over the period from 1995 to 2002 by multiple linear regression. The results show that from 1995 to 1999 the RIV model had better explanatory power than the other two models, and from 2000 to 2002 the AEG and RIV models were the same, an indicator of the Brazilian market's development in the more recent years of the study period. The FCF model had the least explanatory power in all the years analyzed. The results were confirmed by panel data analysis.
ISSN:1807-734X
1807-734X