Empirical evidence of profitability anomaly in the Thai stock market
Vol. 13, No 4, 2020
Yosuke Kakinuma
International College, Panyapiwat Institute of Management, Thailand yosukekak@pim.ac.th |
Empirical evidence of profitability anomaly in the Thai stock market |
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Abstract. This study presents empirical evidence of profitability anomaly in the Stock Exchange of Thailand. The effects of gross profitability, operating profitability, and cash flow-to-price (C/P) on the subsequent stock returns are examined using the data from 2002 to 2019. The results of Fama-Macbeth (1973) regression and Carhart (1997) four-factor model indicate that gross profitability and C/P have significant explanatory power for future returns but not operating profitability. Further analysis confirms that gross profitability-sorted portfolio generates the largest risk-adjusted return and C/P-sorted portfolio presents the best consistency to outperform the market. Investing in the portfolios consisted of stocks with high gross profitability and C/P provides protection from the market downside. |
Received: December, 2019 1st Revision: September, 2020 Accepted: December, 2020 |
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DOI: 10.14254/2071-8330.2020/13-4/6
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JEL Classification: G12, G15, G17 |
Keywords: profitability anomaly, gross profitability, operating profitability, cash flow-to-price, emerging market |