Growth Opportunities and Presidential Cycles: Chile, 1990-2013

Abstract

This study evaluates the growth opportunities in the Chilean stock market between 1990 and 2013, based on an analy- sis of companies’ valuation ratios in the Santiago Stock Exchange. The price to earnings, price to book and price to sales ratios are used as a proxy for growth opportunities.
The firms are classified by industry (Agriculture, Forestry, Fishing and Hunting; Arts, Entertainment and Recrea- tion; Construction; Finance and Insurance; Manufacturing; Mining, Oil and Gas Extraction; Real Estate; Retail; Transportation and Warehousing; and Utilities), according to the North American Industry Classification System (NAICS). The results show statistically significant differences between the presidential cycle’s growth opportunities of Aylwin and Frei Ruiz-Tagle, and Piñera Aylwin, Frei and Lagos, Frei and Bachelet, Frei Ruiz-Tagle Pinera, Lagos and Piñera and Bachelet and Piñera.
No significant differences between the growth opportunities of the last year of Aylwin-Lagos, Aylwin-Bachelet and Lagos-Bachelet were found. The results show evidence about the evolution of the growth opportunities for indus- tries and the Chilean stock market during 1990-2013.