Fundamentalanalyse for valueselskaber: En analyse af det engelske, norske & svenske marked

John Benjamin Blok

Student thesis: Master thesis


Prior studies have documented that simple accounting-based fundamental analysis strategies can shift the distribution of returns earned by high book-to-market investors. This paper examines the possibility of implementing a similar strategy on the English, Norwegian and Swedish markets. I show that the strategy indeed accomplishes this and that the mean return earned by a high book-to-market investor can be shifted 11.76 % (Sweden), 6.8 % (England) and 5.4 % (Norway) annually if the investor uses the strategy to identify financially strong value firms. Furthermore the entire return distribution is shifted right on all markets with the exception of Norway, where only a 90 % shift is accomplished. The strategy was also successful at identifying firms that will experience improved earnings during the next fiscal year. Within the portfolio of value firms on the English- and Norwegian market the benefits to the strategy are concentrated in small companies, and firms with low priced stocks that are illiquid. This adversely affects the possibility of realizing the observed returns and could also explain why the abnormal returns have not been arbitraged away by rational investors. Furthermore nothing indicates that the benefits of financial statement analysis are greater when applied to firms without analyst coverage on the two markets. On the Swedish market the benefits to the strategy are concentrated in small firms, firms without analyst coverage and the strategy relies partially on the purchase of low priced stocks. In addition to this nothing indicates that risk can explain the returns of the entire value portfolio on the three markets. Furthermore the returns of the portfolio consisting of all strong value firms on all markets are driven by the strong performance of the strong low-risk value firms which also cast doubt of a risk-based explanation for the observed returns of the strong value firm portfolio. On all three markets the strategy is more effective in the period of 1999-2008 compared to the period of 1988-1998. A possible explanation is that value firms tend to perform better after recessions and that prices have diverged more than usual from their intrinsic values during the two significant crises we have experienced in this millennium. Lastly, the strategy seems to be most robust on the English market, where the return differences generated by the strategy are still significant when the holding period is extended to two years. On the Norwegian market only the return difference between the portfolio of strong vs. weak value firms is significant and on the Swedish market the return differences are insignificant.

EducationsMSc in Finance and Accounting, (Graduate Programme) Final Thesis
Publication date2011
Number of pages91