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Predicting Stock Returns With Financial Ratios: A Discriminant Analysis Application On The Ise 30 Index Stocks

Author

Listed:
  • Bulent Oz
  • Yucel Ayricay
  • Gokturk Kalkan

    () (Osmaniye Korkut Ata University
    Kahramanmaras Sutçu Imam University
    Kahramanmaras Sutçu Imam University)

Abstract

This study aims to identify the factors that help the prediction of the stock returns for ISE 30 listed companies and also help to decide on which stock would be more suitable by using the most suitable model. With this aim, the stock returns are estimated 1 and 2 years earlier by using the financial ratios of years 2006 and 2005. According to the results obtained from a discriminant analysis, which is a multi-variate statistical analysis, i) the operating turnover and leverage variables of the 1 year model, ii) operations turnover, leverage and liquidity variables of the 2 year model are found to be statistically significant. When the percentages of correct classification are compared 2 year model(% 91.7) turns out to be superior to the 1 year model (%75).

Suggested Citation

  • Bulent Oz & Yucel Ayricay & Gokturk Kalkan, 2011. "Predicting Stock Returns With Financial Ratios: A Discriminant Analysis Application On The Ise 30 Index Stocks," Anadolu University Journal of Social Sciences, Anadolu University, vol. 11(3), pages 51-64, September.
  • Handle: RePEc:and:journl:v:11:y:2011:i:3:p:51-64
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    File URL: http://www.anadolu.edu.tr/arastirma/hakemli_dergiler/sosyal_bilimler/pdf/2011_3/2011-03-04.pdf
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    Cited by:

    1. Süleyman Serdar KARACA & Hatice Neriman BAŞDEMİR, 2012. "The Applicability Of Artificial Neural Network Method Upon Prediction Of Rate Of Stock Return: Example Of 2008 Financial Crisis," Journal of Applied Economic Sciences, Spiru Haret University, Faculty of Financial Management and Accounting Craiova, vol. 7(2(20)/ Su), pages 131-139.

    More about this item

    Keywords

    Financial Ratios; Stock Return Prediction; Discriminant Analysis; ISE;

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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