Aggregate Earnings and Returns in Brazil

Authors

  • Talles Brugni FUCAPE Business School
  • Marcelo Cabus Klotzle Pontifícia Universidade Católica do Rio de Janeiro (PUC-RIO/IAG)
  • Antonio Carlos Figueiredo Pinto Pontifícia Universidade Católica do Rio de Janeiro (PUC-RIO/IAG)
  • Luiz Paulo Lopes Fávero Universidade de São Paulo (USP)
  • Muhhamad Safdar Sial Department of Management Sciences, COMSATS University Islamabad (CUI)

DOI:

https://doi.org/10.22561/cvr.v32i2.5942

Keywords:

Aggregate Earnings, Aggregate Returns, Risk, Interest Rates.

Abstract

We have used the method employed in Kothari, Lewellen and Warner (2006) to show the relationship between aggregate earnings and market returns in Brazil in the period from 1995 to 2017. Our results indicate that the theory of Bernard and Thomas (1990) is more consistent with the US market than with the Brazilian market, signaling that the aggregate post-earnings announcement drift tends to be larger in markets with higher earnings persistence. The findings also indicate that the relationship between aggregate returns and earnings in Brazil tends to be positive for the current period and the next two quarters, corroborating the argument by Sadka and Sadka (2009). Considering that the predictability of earnings in the US market is higher than that in Brazil, our results also support the argument by He and Hu (2014) that the relationship between aggregate earnings and returns is linked to each country’s level of disclosure. However, new evidences reveal the influence of high interest rates on financial market results, suggesting that expectations of increased interest rates tend to reduce aggregate current returns in Brazil due to the possible migration of capital to lower risk, given the attractiveness of their returns in an environment of high inflation.

Author Biographies

Talles Brugni, FUCAPE Business School

Pós-doutor em Finanças pela PUC-Rio, Doutor em Controladoria e Contabilidade pela Universidade de São Paulo - USP (2016). Professor Associado da FUCAPE Business School.

Marcelo Cabus Klotzle, Pontifícia Universidade Católica do Rio de Janeiro (PUC-RIO/IAG)

Associate Professor of Finance at PUC-RIO (IAG Business School).

Antonio Carlos Figueiredo Pinto, Pontifícia Universidade Católica do Rio de Janeiro (PUC-RIO/IAG)

Associate Professor of Finance at PUC-RIO (IAG Business School).

Luiz Paulo Lopes Fávero, Universidade de São Paulo (USP)

Associate Professor of Applied Econometrics at University of São Paulo (FEA/USP).

Muhhamad Safdar Sial, Department of Management Sciences, COMSATS University Islamabad (CUI)

PhD (Accounting), Wuhan University. Assistant Professor at COMSATS University Islamabad (CUI).

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Published

2021-07-29

How to Cite

BRUGNI, T.; KLOTZLE, M. C. .; PINTO, A. C. F.; FÁVERO, L. P. L.; SIAL, M. S. Aggregate Earnings and Returns in Brazil. Contabilidade Vista & Revista, [S. l.], v. 32, n. 2, p. 38–58, 2021. DOI: 10.22561/cvr.v32i2.5942. Disponível em: https://revistas.face.ufmg.br/index.php/contabilidadevistaerevista/article/view/5942. Acesso em: 21 dec. 2024.

Issue

Vol. 32 No. 2 (2021): Volume 32| Número 2| Maio/Ago. | 2021

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