Where to invest in BRICs? An analysis from the point of view of the industrial organization

Abstract

The objective of this study is to identify the most interesting industries for investing in Brazil, Russia, India e China (BRICs), according to risk-return and value premises, based in the theory of Industrial Organization (IO) tradition. This work analyzed 2770 firms in the BRICs from 1995 until 2008. With this purpose were compared rates of performance as ROA (return on assets), ROE (return on shares), average price earnings, market value over book value and Tobin’s Q of the companies. The results support studies from Fama and French (1992), Mohanram (2005) and Goldszmidt, Brito and Vasconcelos (2007), although deviates from World Bank (2008) as to risk-return enhancing in China. Results show that the most attractive sectors for investment using the risk-return approach, filtering by value indicators, would be oil & gas in Russia and mining in Brazil, India and China, while the least interesting industries would be textile, motor vehicle parts, tools & accessories and telecommunications in Brazil.