Persistence in Generating Returns by the European Union Companies

Abstract

In this paper we aim to check whether there is persistence in stock returns generated by companies. The study is carried out on the entire universe of companies in the 28 EU countries. To examine the persistence phenomenon, we develop a new test based on dependency analysis, using auto-regressive models in time series created ad-hoc. This methodology serve to document, as a general result, that 20% of EU companies are maintained persistently between better or worse. We note that these results have several important implications for practitioners and companies, for the EU as a whole, for researchers and the efficient market hypothesis, and also methodological implications arise since a new persistence test is developed.