RT Journal Article
SR Electronic
T1 Portfolio Investing with EVA
JF The Journal of Portfolio Management
FD Institutional Investor Journals
SP 34
OP 40
DO 10.3905/jpm.2008.706240
VO 34
IS 3
A1 Janis K. Zaima
YR 2008
UL https://pm-research.com/content/34/3/34.abstract
AB Investment strategy using the EVA metric has gained popularity, particularly with Fortune's publication of the top wealth creators as calculated by Stern Stewart & Co. In this article, the author examines if portfolios created with higher EVA firms lead to higher returns. Two anomalies exist. First, negative EVA to market value (EVA–MV) firms earn, on average, the highest portfolio returns over a 10-year period. Second, the relationship between the EVA–MV ratio and portfolio returns is not linear, but U-shaped. However, when a reward-to-risk measure is utilized, a positive linear risk–return relationship prevails, providing evidence that the EVA–MV ratio is a proxy for risk.TOPICS: Accounting and ratio analysis, ESG investing, statistical methods