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Fundamentals and stock returns on the Warsaw Stock Exchange. The application of panel data models

Author

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  • Monika Witkowska

    (Warsaw School of Economics)

Abstract

This study examines the relationship between the future stock returns and the fundamental indices for companies listed on the Warsaw Stock Exchange in Poland. The fundamental exogenous variables were constructed following the previous research of Lev and Thiagarajan [1993], Abarbanell and Bushee [1997], Piotroski [2000] and Mohanram [2004], while the endogenous variable is defined as a one-year-ahead stock return. Empirical analysis based on a panel data model for 187 companies in years 1999 – 2003 finds that the future stock returns are significantly related to three fundamental variables, i.e. gross margin, sales and administrative expenses and return on assets. Stock returns are also strongly associated with price-earnings ratio. Most of the relationships do no longer hold in case of short-term future stock returns.

Suggested Citation

  • Monika Witkowska, 2006. "Fundamentals and stock returns on the Warsaw Stock Exchange. The application of panel data models," Working Papers 11, Department of Applied Econometrics, Warsaw School of Economics.
    • Handle: RePEc:wse:wpaper:11
    as

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    File URL: http://kolegia.sgh.waw.pl/pl/KAE/struktura/IE/struktura/ZES/Documents/Working_Papers/aewp04-06.pdf
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    References listed on IDEAS

    as
    1. Chan, Louis K C & Hamao, Yasushi & Lakonishok, Josef, 1991. "Fundamentals and Stock Returns in Japan," Journal of Finance, American Finance Association, vol. 46(5), pages 1739-1764, December.
    2. Lev, B & Thiagarajan, Sr, 1993. "Fundamental Information Analysis," Journal of Accounting Research, Wiley Blackwell, vol. 31(2), pages 190-215.
    3. Piotroski, JD, 2000. "Value investing: The use of historical financial statement information to separate winners from losers," Journal of Accounting Research, Wiley Blackwell, vol. 38, pages 1-41.
    4. Ou, Jane A. & Penman, Stephen H., 1989. "Financial statement analysis and the prediction of stock returns," Journal of Accounting and Economics, Elsevier, vol. 11(4), pages 295-329, November.
    5. Fama, Eugene F. & French, Kenneth R., 1993. "Common risk factors in the returns on stocks and bonds," Journal of Financial Economics, Elsevier, vol. 33(1), pages 3-56, February.
    6. William F. Sharpe, 1964. "Capital Asset Prices: A Theory Of Market Equilibrium Under Conditions Of Risk," Journal of Finance, American Finance Association, vol. 19(3), pages 425-442, September.
    7. Abarbanell, JS & Bushee, BJ, 1997. "Fundamental analysis, future earnings, and stock prices," Journal of Accounting Research, Wiley Blackwell, vol. 35(1), pages 1-24.
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    Cited by:

    1. Monika Kubik-Kwiatkowska, 2012. "Value relevance of financial reporting on the Warsaw Stock Exchange," Working Papers 60, Department of Applied Econometrics, Warsaw School of Economics.

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    More about this item

    Keywords

    stock returns; fundamental analysis; panel data models;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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