Degree Name

Doctor of Philosophy


School of Accounting, Economics and Finance


To undertake a sophisticated analysis of individual securities, investors often rely on fundamental data as evidence of historical corporate performance. Financial statement analysis has therefore become an essential microscope for assessing the financial health of a company and thereby enabling more effective decision making. Using a cross country perspective, this thesis examines the predictive power of accounting fundamentals across the Pan-Asian region. It draws on a large fraction of published research that examines the relation between financial statement information and capital markets commonly referred to as capital markets research. Among the sources of demand for capital markets research that explain its popularity, Kothari (2001) lists fundamental analysis and valuation as well as tests of capital market efficiency.

The underlying theme of this dissertation is the informational efficiency of stock markets and the factors that drive prices in a number of countries. I include both developed and emerging or developing markets to provide a fuller spectrum of the differing economic, political, institutional and social conditions describing a diverse range of capital markets in the Pan-Asian region. Aiming to draw a link between past and future performance of capital market doctrines, this thesis adopts a two-dimensional perspective.

In Chapter 2, which discusses the ins and outs of value investing, I adopt a backward-looking methodological perspective and present some evidence on how investing based on the readily available public historical accounting information can help investors achieve positive returns in excess of the risk-free rate in a range of Pan-Asian countries. The first research objective of this thesis is to examine the performance of value investing strategies in five Pan-Asian countries (Australia, Hong Kong, Japan, South Korea and Taiwan) over ten years from 2001 to 2010. In this study, I investigate the properties of the financial variables proposed as explanatory factors for future stock returns. The underlying proposition of this thesis is that investors tend to buy companies with particular characteristics, where these characteristics are fundamental accounting factors, such as earnings to price, for example. The idea is to compare the fundamental assessment of the stock’s value to its current stock price, and purchase stocks when the discrepancy between the assessment and the stock price is compelling.

In contrast, in Chapter 3, which presents a study of analyst forecasts of company earnings per share (or EPS), I embrace a forward-looking methodological perspective and examine how investing based on the not-so-readily available public accounting information that is provided by financial analyst forecasts can help investors realise positive returns in the future. As part of the study, I investigate the reliability of analyst forecasts in six Pan-Asian countries (Australia, Hong Kong, India, Singapore, South Korea and Taiwan) over twelve years from 2000 to 2011. The second research objective is to explore which method of consensus aggregation is more effective in predicting actual earnings and determine whether time weighted consensus estimates offer a more effective method for predicting company actual EPS figures than simple mean or median analysis. The evaluation of the reliability of analyst earnings forecasts is an important aspect of research for different reasons. Many empirical studies employ analyst forecasts as a proxy for the market’s expectations of future earnings and investors tend to rely on analyst forecasts when evaluating and selecting individual shares.

This thesis lays foundation for understanding the informational efficiency of capital markets and the factors that influence stock prices. The semi-strong concept of an efficient market proposes that share prices reflect the publicly available financial information. If that indeed were the case, investors would not be able to generate positive and significantly different from zero returns. The goal of this dissertation is not to make revolutionary conclusions on whether the efficient market hypothesis (EMH) should be dismissed. Instead, the aim is to present evidence suggesting that capital markets in the Pan-Asian countries covered in this thesis may not feature the semi-strong form of market efficiency.



Unless otherwise indicated, the views expressed in this thesis are those of the author and do not necessarily represent the views of the University of Wollongong.