Earnings Yield as a Predictor of Return on Assets, Return on Equity, Economic Value Added and the Equity Multiplier

Modeling of Banking Profit via Return-on-Assets and Return-on-Equity

In our contribution, we model bank profitability via return-on-assets (ROA) and return-on-equity (ROE) in a stochastic setting. We recall that the ROA is an indication of the operational efficiency of the bank while the ROE is a measure of equity holder returns and the potential growth on their investment. As regards the ROE, banks hold capital in order to prevent bank failure and meet bank cap...

Legal Determinants of the Return on Equity

Recent work documents that better legal institutions are associated with broader equity markets. We investigate whether differences in legal institutions also help explain the international cross-section of expected stock returns. Three main regularities emerge. First, total stock market returns are positively correlated with overall measures of the quality of institutions, such as judicial eff...

Effect of Business Groups Affiliation on Cash Holdings and Return on Equity

Nowadays, business groups play an outstanding role in financial markets. Corporates in the trading groups are able to use technology, capital, human resources, productions and services of other members in the group in addition to their own resources and capabilities. Thus, this paper studies the effect of business group affiliation on cash holdings and return on equity. The sample involves 94 c...

The Higher Moments of Future Return on Equity

Learning and the Return to Private Equity

This paper suggests a solution to the puzzling finding documented in Moskowitz and Vissing-Jorgensen (2002) that the return to an index of private equity is equal to the return to the CRSP index of public equity even though investment in private firms is substantially riskier. It presents an occupational choice model where human and financial capital can be jointly invested in a private busines...