Examining the Ability of EVA Momentum, EVA Spread and Conventional Performance Measures to Predict Stock Return

Document Type : Research Paper

Authors

1 Prof., Faculty of Management and Economics, Islamic Azad University, Tehran, Iran

2 Ph.D. Candidate in Finance, Allameh Tabatabaei University, Tehran, Iran

3 Ph.D. Candidate in Finance, Islamic Azad University, Science and Research Branch, Tehran, Iran

Abstract

Using data acquired from companies listed on Tehran stock exchange, during a five-year time period from 1388 to 1392, this study documents the impacts of economic value added (EVA), EVA spread, EVA momentum, and return on assets (ROA) on stock return as a measure of investors’ wealth creation. EVA spread and EVA momentum are new methods of firms’ performance measurement constructed on the basis of EVA. EVA and ROA are the traditional methods of performance measurement widely used currently. EVA spread and EVA momentum are argued to have better ability in explaining the variance of stock return compared to the two traditional methods. To test hypotheses, this study applies Multiple Linear Regression Model. The results indicate that EVA spread, EVA momentum, and ROA have significant effects on stock return, while the relationship between EVA and stock return is not significant. The regression coefficients of EVA spread and ROA are positive, but, it is found that the relationship between EVA momentum and stock return is negative.

Keywords

Main Subjects

References

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Financial Research Journal
Volume 18, Issue 2
May 2016
Pages 307-330

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