Relative and Incremental Explanatory Power of Economic Value Added over Traditional Profitability Measures in Explaining Stock Returns: Evidence from Indian NSE Listed Pharmaceutical Companies
DOI:
https://doi.org/10.33516/rb.v42i4.139-153pKeywords:
EVA, Net Income, Operating Income, Residual Income, Relative Information Content, Incremental Information Content.Abstract
The aim of this study is to investigate the relative and incremental explanatory power of EVA over traditional profitability measures (namely net income, operating income and residual income) in explaining stock returns of NSE listed Pharmaceutical companies during the period 2001-2014. It may be concluded from the overall analysis of the relative information criteria that EVA has more explanatory power of stock returns than the operating income and residual income under the pharmaceutical industry. Moreover, it has also been established that EVA adds incremental information over net income, operating income and residual income in explaining the variability of stock returns at least in pharmaceutical industry during the period of our study.Downloads
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