The contribution of fundamental analysis after a currency devaluation Academic Article

abstract

• For a sample of companies traded on the Mexican Bolsa, fundamental analysis is used to investigate the value of financial statement information to investors after the December 1994 currency devaluation. Associations with contemporary returns show that earnings in the year of the devaluation lose value relevance, but fundamental signals, which incorporate the more detailed accounting information provided in financial statements, retain considerable explanatory power (R2 is 25 percent). After the devaluation, fundamental signals based on changes in selling and administrative expenses and changes in gross margin are significant in several analyses, including predictions of future earnings, analysts' forecast revisions, and analysts' forecast errors. Because analysts underutilize those signals, an opportunity exists after the devaluation for a substantial profit from a zero investment trading strategy.

authors

• Swanson, Edward

published proceedings

• ACCOUNTING REVIEW

author list (cited authors)

• Swanson, E. P., & Rees, L.

citation count

• 22

complete list of authors

• Swanson, EP||Rees, L

publication date

• January 2003

publisher

• American Accounting Association  Publisher

published in

• Accounting Review  Journal

keywords

• Currency Devaluation
• Economic Shock
• Financial Statement Analysis
• Mexico

Digital Object Identifier (DOI)

• 10.2308/accr.2003.78.3.875

start page

• 875

end page

• 902

volume

• 78

issue

• 3

URL

• http%3A%2F%2Fdx.doi.org%2F10.2308%2Faccr.2003.78.3.875