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Does Fundamental Analysis Predict Stock Returns? Evidence from Non-Financial Companies Listed on KSE

  • Nadeem Iqbal

    ()

  • Sajid Rahman Khattak

    ()

  • Muhammad Arif Khattak

    ()

    ("Dimitrie Cantemir" Christian University)

Registered author(s):

    Present study aims at investigating whether historical accounting data (fundamental analysis) can predict future stock returns. The paper goal is to show the predictive quality of fundamental analysis and FSCORE in Pakistan. This paper use five signals from five different areas of; profitability ratios, efficiency ratios, liquidity ratios, leverage ratios, and market based ratios for the study. Data were selected for ten year period from 2000 to 2009. The sample of the study consists of all non-financial companies listed on Karachi Stock Exchange having ten years consecutive data are available. For data analysis the study used ordinary least square (OLS). The study found that fundamental analysis cannot predict stock returns in Pakistani listed companies. The study found that FSCORE has insignificant relation with stock returns of Pakistani listed companies.

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    File URL: http://orizonturi.ucdc.ro/arhiva/2013_khe_4_pdf/khe_vol_5_iss_4_182to190.pdf
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    Article provided by Faculty of Finance, Banking and Accountancy Bucharest,"Dimitrie Cantemir" Christian University Bucharest in its journal Knowledge Horizons - Economics.

    Volume (Year): 5 (2013)
    Issue (Month): 4 (December)
    Pages: 182-190

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    Handle: RePEc:khe:journl:v:5:y:2013:i:4:p:182-190
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    1. Fama, Eugene F. & French, Kenneth R., 1988. "Dividend yields and expected stock returns," Journal of Financial Economics, Elsevier, vol. 22(1), pages 3-25, October.
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    8. Kormendi, Roger & Lipe, Robert, 1987. "Earnings Innovations, Earnings Persistence, and Stock Returns," The Journal of Business, University of Chicago Press, vol. 60(3), pages 323-45, July.
    9. Christopher J. Neely & Paul A. Weller, 2011. "Technical analysis in the foreign exchange market," Working Papers 2011-001, Federal Reserve Bank of St. Louis.
    10. Frankel, Jeffrey A & Froot, Kenneth A, 1986. "Understanding the U.S. Dollar in the Eighties: The Expectations of Chartists and Fundamentalists," The Economic Record, The Economic Society of Australia, vol. 0(0), pages 24-38, Supplemen.
    11. Stober, Thomas L., 1992. "Summary financial statement measures and analysts' forecasts of earnings," Journal of Accounting and Economics, Elsevier, vol. 15(2-3), pages 347-372, August.
    12. Dichev, Ilia D. & Tang, Vicki Wei, 2009. "Earnings volatility and earnings predictability," Journal of Accounting and Economics, Elsevier, vol. 47(1-2), pages 160-181, March.
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