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The Enterprise Multiple Investment Strategy: International Evidence

Published online by Cambridge University Press:  13 August 2015

Christian Walkshäusl  and
Sebastian Lobe
Christian Walkshäusl
Affiliation:
christian.walkshaeusl@ur.de, Center of Finance, University of Regensburg, 93053 Regensburg, Germany
Sebastian Lobe*
Affiliation:
sebastian.lobe@maine.edu, Maine Business School, University of Maine, Orono, ME 04469.
*
*Corresponding author: sebastian.lobe@maine.edu
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Abstract

The enterprise multiple (EM) predicts the cross section of international returns. The return predictability of EM is similarly pronounced in developed and emerging markets and likewise strong among small and large firms. An international portfolio of low-EM firms outperforms a portfolio of high-EM firms by about 1% per month. The EM value premium is individually significant for the majority of countries, remains largely unexplained by existing asset pricing models, is robust after controlling for comovement with the respective U.S. premium, and is highly persistent for up to 5 years after portfolio formation, making it a promising strategy for investors.

Type
Research Articles
Information
Journal of Financial and Quantitative Analysis , Volume 50 , Issue 4 , August 2015 , pp. 781 - 800
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2015 

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