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The Relationship Between Share Prices and DUPONT Model Components: Evidence from Mexican Stock Market

Autor/es Anáhuac
Luis Manuel Tovar Rocha, Julio Téllez Pérez
Año de publicación
Journal o Editorial
Revista Mexicana de Economia y Finanzas Nueva Epoca

This article presents the possible association between the three components (profit generation, asset efficiency and financial leverage) of the DUPONT ratio and share prices. The generalized method of moments (GMM) estimation was used with a sample of 23 companies traded on the Mexican stock exchange between 2008 and 2016, considering a period of three days before and three days after the presentation of the quarterly results. It is noted that the generation of profit and efficiency are the components of the DUPONT model that are strongly associated with stock prices, while the leverage effect is the component with the least impact. This empirical work is intended to help understand the relationship between accounting information and stock prices. The study identifies variables that influence decision-making and does not seek to be a predictive model of the value of actions in the future. This research differs from previous studies because it considers the volatility index (VIMEX) as a control variable.