Thesis (M.B.A.)--Boston University / PLEASE NOTE: Boston University Libraries did not receive an Authorization To Manage form for this thesis or dissertation. It is therefore not openly accessible, though it may be available by request. If you are the author or principal advisor of this work and would like to request open access for it, please contact us at open-help@bu.edu. Thank you. / 2031-01-01

As the existence of value premium has been showed in previous studies, this paper focuses on studying strategies for capitalizing this value premium in Swedish stock market. This paper studies the possible gains and risks of value investing strategies constructed with dividend yield, price-to-earnings (P/E) and price-to-book (P/B) ratios in Swedish stock market during 2006-2016.The findings show that the studied value portfolios offered abnormal returns during the studied time-period. Moreover, value stocks performed better than growth stocks when dividend yield and P/B-ratio were used as criteria. However, the paper could not confirm the same effect in P/E-ratio as high P/E tended to work better than low P/E. Out of the studied ratios, the best risk-adjusted returns were received from companies with the lowest P/B-ratios.The findings in this paper also indicate that including more ratio-based criteria in to an investment strategy does not offer more risk-adjusted returns.

This diploma thesis examines the possibilities of using the PE ratio in the creation of a stock portfolio on the Chinese and American stock market. The result of this work is the finding that low PE shares achieve higher risk-weighted returns over short and long investment horizons than shares with high PE values in both ex-amined markets. However, based on the detected volatility of the shares with the extreme values of PE, it is possible to recommend the use of this indicator for creation of the portfolio only to the most speculative investors.

The aim of this paper is to test whether an investment strategy originally created by Piotroski (2000), can be refined by combining it with the price-to-earnings-anomaly. In detail, we accomplish this by implementing Piotroskis F_SCORE-model to identify and consequently separate financially weak- and strong firms. Furthermore, we create an investment portfolio based on a combination of the highest rated companies according to the F_SCORE-model, and the most undervalued companies from the price-to-earnings-anomaly, to create a joint investment strategy (M_STRAT). This is carried out during the time-period 1999-2009, while reconstructing the portfolio annually. The results of our study show that, by combining the two models, we are able to achieve a market-adjusted return of 44,1%, hence amplifying the original F_SCORE-model by 17%.

The purpose of our study was to examine the relationship between the volatility of price multiples and the volatility of stock prices in the Swedish market from 2003 to 2012. Our focus was on the price-to-earnings ratio and the price-to-book ratio. Some previous studies showed a link between the price multiples and the volatility of stock prices, this made us question whether there should be a link between the volatility of the price multiples and the volatility of the stock prices. The importance of this subject is accentuated by the financial crisis, as we provide investors with information regarding the movements of price multiples and stock prices. Moreover, we test if the volatility of the price multiples can be used to create a prediction model for the volatility of stock prices. Also we fill the gap in the previous researches as there is no previous literature about this topic. We conducted a quantitative research using statistical tests, such as the correlation test and the linear regression test. For our data sample we chose the Sweden Datastream index. We first calculated the volatility using the GARCH model and then continued with our statistical tests. The results of our tests showed that there is a relationship between the volatility of the price multiples and the volatility of the stock prices in the Swedish market in the past ten years. Our findings show that the correlation coefficients vary across industries and over time in both strength and direction. The second part of our tests is concerned with the linear regression tests, mainly calculating the coefficient of determination. Our results show that the volatility of the price multiples do explain changes in the volatility of stock prices. Thus, the volatility of the P/E ratio and the volatility of the P/B ratio can be used in creating a prediction model for the volatility of stock prices. Nevertheless, we also find that this model is best suited when the economic situation is unstable (i.e. crisis, bad economic outlook) as both the correlation coefficient and the coefficient of determination had the highest values in the last five years, with the peak in 2008.

This Master Thesis deals with the usability of fundamental indicators for building a stock portfolio regarding chosen equities from the Prague Stock Exchange. The output of the work is finding that stocks with the lowest values of price to earnings ratio and price to book ratio make higher return than stocks with the highest values of these indicators. These stocks exceed latter with taking lower risk based on standard deviation of returns. The usability of indicators was confirmed by these findings. Another conclusion of this Thesis is finding that stocks with the lowest values of these indicators exceeded benchmark represented by PX-TR index.

The aim with this thesis is to investigate whether increased capital flows to ESG screened indexes create higher price-to-earnings (P/E) ratios and momentum in the included stocks during the chosen time period of three years, from 2018 to 2020. The thesis will evaluate the capital flows to ESG indexes and compare both performance and P/E ratios between those and their corresponding Mother indexes. The study will also look at the development of capital flows, performance and P/E ratios separately in the four chosen geographical indexes; Global, Europe, US and Emerging Markets. The theoretical framework goes through four relevant subjects for this study; passive investing, ESG, momentum and the P/E ratio. The study has shown that the capital flows in all four ESG indexes increased during the chosen time period. Moreover, it could be proven that three out of four ESG indexes outperformed their Mother indexes, namely, Global, Europe and Emerging Markets. In the U.S. the Mother index outperformed the ESG index. Three out of four geographical indexes also had a higher increase in the average P/E ratio than their mother indexes. Here, the Global market stood out as the one that had a lower increase in P/E ratio than its Mother index. Lastly, regression analyses were made to see the relationship between the variables capital flows, average P/E ratios in the indexes and the performance of the indexes. The study showed significantly that capital flows is the explanatory variable for the increased P/E ratios on the European ESG index. However, for the other indexes no significant correlation could be proved. This led to an interesting discussion and conclusion, and also left us with a question mark. What is the reason behind this result on the European market, and why was it not possible to see any significant correlation on the other markets? Further research in this field is needed and some ideas are discussed in the last chapter of the thesis.

How capital structure influences corporate performance and value has been in the interest of researchers and scholars for more than half a century, but an answer is yet to be found. The main objective of the present paper is to contribute with data for this cause and hopefully help to clarify this mystery. The method that was used was by analyzing the impact of debt on profitability and market valuation through linear regression. The study examined 17 Swedish property companies listed on Nasdaq OMX Large Mid and Small Cap over a 6 year period (2007-2012). The authors found a slightly negative relationship between debt-to-equity and profitability measured by return on equity (ROE) as well as by return on assets (ROA). However, significance was only found in terms of return on assets. The authors found no relationship between debt-to-equity and market valuation measured by price-to-earnings (P/E) nor price-to-book (P/B).

In the field of sustainable finance, Environmental-, Social- and Governance-ratings (ESG) have become an acknowledged measurement of a firm's sustainability performance. The increased awareness of sustainability issues in today's society is undeniable. However, based upon contradicting results from previous research, it was uncertain if investors were rewarding a firm’s sustainability efforts in the form of a lower cost of equity. The purpose of this thesis has therefore been to examine the relationship between sustainability, risk and valuation as well as stock-price behavior in times of crisis regarding large firms publicly listed in the Nordic countries. In order to fulfil the purpose, various multiple regression models have been conducted on quarterly data from the period between 2011 to 2020. The approach chosen to examine if ESG has a relation to the cost of equity has been to calculate the implied cost of equity inferred from consensus forecasts of future financial development and stock price at each point in time, also known as the ex-ante cost of equity. Since the independent variable ESG-score was not likely to be the sole variable to affect the independent variables in our multivariate regression models, we have followed previous studies in the choice of control variables. The empirical results of this study showed a significantly negative relationship between a firm’s ESG-score and the cost of equity. In addition, our results showed a significantly positive relationship between a firm’s ESG-score and both the price-to-earnings ratio as well as the price-to-book ratio while no significant relationship between a firm’s ESG-score and the enterprise value to earnings before interest and taxes ratio could be established. Finally, the results of this thesis showed that firms with a greater ESG-score generated excess returns during the latest market turmoil of 2020 caused by the Covid-19 outbreak. This thesis challenges the value-destruction view of ESG-efforts since our results indicate that investors are pricing sustainability risk with a negative risk premium in line with the value creation approach. No causality test has been performed during this study, however several possible mechanisms by which ESG impacts the valuation and crisis resistance have been discussed based upon previous research and the theoretical framework. We argue for the reduced cost of equity to reflect diminished information asymmetry, a larger investor base, improved growth and cash-flow opportunities as well as reduced risk for litigations as aconsequence of a more sustainable business conduct. To the best of our knowledge, no previous study on the topic has been conducted on the Nordic markets. This study fills thus a research gap on the relation between sustainability, risk andequity market valuation and we sincerely hope to have contributed to academia with new approaches.

The topic of this Bachelor Thesis is “Which of these valuation methods provides the most accurate valuation forecast”. Assuming that the year is 2020, the goal of this thesis is to forecast the future stock prices of the fifty largest US-based companies on the Nasdaq stock exchange for 2021 and 2022. By using a quantitative method and looking ten years back at historical data. We determine which valuation method provides the most accurate stock price when conducted in a non-sector specific sample by comparing predicted prices to actual stock prices and discussing the results. There are several ways to evaluate a company and the ones being utilized in this thesis are the discounted cash flow valuation method, the price-to-earnings ratio method (equity multiple), and enterprise value to enterprise value before interest, tax, and depreciation (firm multiple). Our results show that when reviewing the valuations of multiple companies in different sectors the relative valuation methods provide better predictions with EV/EBITDA rather than the discounted cash flow method. This thesis provides the reader with a comprehensive overview of these different valuation methods and their effectiveness in providing valuation forecasts. The result of this thesis is beneficial for policymakers, investors, and financial analysts when forecasting future stock prices.