Dinis Pedro Maculuve
Abstract
Accounting and economic based measures as value relevant constructs for stock return appraisal and consequent forward-looking correlation with shareholders’ return are paramount for equity holders. However, several empirical studies concerning the association between these constructs and shareholders’ returns have yielded different results. Additionally, on the Johannesburg Stock Exchange (JSE), the correlation between the refined economic value added (REVA) and economic value-added momentum (EVAM) and shareholders’ returns have not been tested as intensively as economic value added (EVA). Therefore, this study sought to determine the predictive power of economic-based measures (EVA, REVA, and EVAM) as a group and at a regressor individual level.
The study used descriptive statistics (pairwise correlation, multicollinearity test) and panel data estimation techniques (panel unit root test, fixed modified ordinary least square and fixed effect model) to analyse a sample of 52 JSE-listed firms from 2007 to 2017. The results indicate that, as a group, the economic based indicators (EVA, REVA, and EVAM) predict shareholders’ return on the JSE. Additionally, at the regressor individual level, only REVA can be used to predict shareholders’ return on the JSE.