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THE VALUE IN FUNDAMENTAL ACCOUNTING INFORMATION
Author(s) -
Turtle H. J.,
Wang Kainan
Publication year - 2017
Publication title -
journal of financial research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.319
H-Index - 49
eISSN - 1475-6803
pISSN - 0270-2592
DOI - 10.1111/jfir.12119
Subject(s) - volatility (finance) , portfolio , economics , econometrics , momentum (technical analysis) , financial economics , accounting , business
We examine the role of fundamental accounting information in shaping portfolio performance. Using a conditional performance approach, we address the concern that the positive relation between Piotroski's F Score and ex post returns is due to risk compensation. Our results show that portfolios of firms with strong fundamental underpinnings generate significant positive and time‐varying performance. One potential source of these performance gains is an underreaction to public information (such as momentum and F Score ) when information uncertainty (proxied by size, illiquidity, and idiosyncratic volatility) is high. In addition, conditional performance benefits seem prevalent in periods of high investor sentiment.